A REVIEW OF THE 

ADMINISTRATION’S FY2007 

HEALTH CARE PRIORITIES 

HEARING 

BEFORE THE 

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED NINTH CONGRESS 

SECOND SESSION 

FEBRUARY 15, 2006 

Serial No. 109-113 

Printed for the use of the Committee on Energy and Commerce 

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 

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WASHINGTON : 2006 

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30-310PDF 
COMMITTEE ON ENERGY AND COMMERCE 

JOE BARTON, Texas, Chairman 

RALPH M. HALL, Texas 

MICHAEL BILIRAKIS, Florida 

 Vice Chairman 

FRED UPTON, Michigan 

CLIFF STEARNS, Florida 

PAUL E. GILLMOR, Ohio 

NATHAN DEAL, Georgia 

ED WHITFIELD, Kentucky 

CHARLIE NORWOOD, Georgia 

BARBARA CUBIN, Wyoming 

JOHN SHIMKUS, Illinois 

HEATHER WILSON, New Mexico 

JOHN B. SHADEGG, Arizona 

CHARLES W. “CHIP” PICKERING, Mississippi 

 Vice Chairman

VITO FOSSELLA, New York 

STEVE BUYER, Indiana 

GEORGE RADANOVICH, California 

CHARLES F. BASS, New Hampshire 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE FERGUSON, New Jersey 

MIKE ROGERS, Michigan 

C.L. “BUTCH” OTTER, Idaho 

SUE MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

GRESHAM BARRETT, South Carolina 

JOHN D. DINGELL, Michigan 

 Ranking Member 

HENRY A. WAXMAN, California 

EDWARD J. MARKEY, Massachusetts 

RICK BOUCHER, Virginia 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

SHERROD BROWN, Ohio 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

ALBERT R. WYNN, Maryland 

GENE GREEN, Texas 

TED STRICKLAND, Ohio 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MIKE DOYLE, Pennsylvania 

TOM ALLEN, Maine 

JIM DAVIS, Florida 

JAN SCHAKOWSKY, Illinois 

HILDA L. SOLIS, California 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

BUD ALBRIGHT, Staff Director 

DAVID CAVICKE, General Counsel

REID P. F. STUNTZ, Minority Staff Director and Chief Counsel

(II) 
CONTENTS 

Page 

Testimony of: 

Leavitt, Hon. Michael O., Secretary , U.S. Department of Health and Human Services 26 

Additional material submitted for the record: 

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

response for the record ................................................................................................... 102 

(III) 

(1) 

A REVIEW OF THE ADMINISTRATION’S 

FY2007 HEALTH CARE PRIORITIES 

WEDNESDAY, FEBRUARY 15, 2006 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

 The committee met, pursuant to notice, at 2:00 p.m., in Room 2123 

of the Rayburn House Office Building, Hon. Joe Barton [chairman] 

presiding. 

 Members present: Representatives Hall, Bilirakis, Upton, Stearns, 

Gillmor, Deal, Whitfield, Norwood, Shimkus, Wilson, Fossella, 

Radanovich, Walden, Terry, Ferguson, Otter, Murphy, Burgess, 

Blackburn, Dingell, Waxman, Markey, Pallone, Brown, Rush, Eshoo, 

Stupak, Engel, Wynn, Strickland, DeGette, Capps, Allen, Schakowsky, 

Solis, Gonzalez, Inslee, Baldwin, and Barton. 

 Staff present: Chuck Clapton, Chief Health Counsel; Melissa 

Bartlett, Counsel; Ryan Long, Professional Staff Member; Nandan 

Kenkeremath, Counsel; Bill O’Brien, Research Analyst; David 

Rosenfeld, Counsel; Brandon Clark, Policy Coordinator; Chad Grant, 

Legislative Clerk; John Ford, Minority Counsel; Chris Knauer, Minority 

Investigator; Purvee Kempf, Minority Counsel; Amy Hall, Minority 

Health Professional Staff Member; Bridgett Taylor, Minority Health 

Professional Staff Member; Jessica McNiece, Minority Research 

Assistant; and Jonathan Brater, Minority Staff Assistant. 

 CHAIRMAN BARTON. The committee will come to order. The chair 

recognizes himself for a five minute opening statement and then we will 

recognize Mr. Dingell for a five minute opening statement. Then all the 

members who wish to make an opening statement will be recognized for 

one minute. Let us see as I set the clock. 

 Good afternoon, I want to begin by welcoming the Secretary of 

Health and Human Services, the Honorable Michael Leavitt, to the 

Energy and Commerce Committee. We look forward to working with 

you this year and we look forward to hearing from you today about the 

Administration’s fiscal year 2007 health care priorities budget. I want to 

thank you for your assistance in developing the recent reform package 

that we put in place for the Medicaid Program. As a former governor, 

you understand and appreciate the need to improve this program. 

 Through the passage of the Deficit Reduction Act, we are beginning 

to sustain Medicaid for those people who most often need the health 
2

care, and to get good health care through good jobs in a thriving 

economy instead of a Government welfare program. Reforms that we 

have adopted recently are beginning to rescue the program from the 

threat of financial collapse that has drug the program down over the last 

10 to 15 years. We look forward to working with you in the future to 

implement this program and also to working with the governors of the 50 

States to implement the program. 

 I want to highlight some of the changes in the law that has not yet 

received the public attention that they deserve. According to the 

Congressional Budget Office, 115,000 disabled children covered by the 

Family Opportunity Act will receive improved health care services as a 

result of the recently passed Deficit Reduction Act. The new law will 

provide access to new home and community based care to 120,000 

additional individuals who will facilitate 100,000 nursing home residents 

to return to their communities through the Administration’s Money 

Follows the Person Administration Program. These are the true results 

of Medicaid reform. Better access for better care for those in our society 

who need our assistance. 

 There is still much to do to improve long-term health care service 

delivery and financing, as well as to promote Medicaid managed care. I 

have received your proposals regarding additional improvements to the 

Medicaid program. I look forward to working with you this year on 

some of those programs. 

 This year, the Secretary and the Administration will also begin to 

implement the Medicare prescription drug benefit. Making this program 

succeed is a high priority of yours; it is a high priority of this committee 

that I chair. Since it began, critics have tried to make patients believe 

that they are not smart enough to understand the new Medicare drug 

benefit, that it would provide inadequate coverage, and that signing up is 

not worth their time because it cannot save them any money. The critics 

are wrong about this. They were wrong when they complained about the 

Medicare prescription drug card. They were wrong when they said 

nobody would offer any insurance plan, and they are wrong now. Some 

sense political advantage in condemning the program and others cannot 

bring themselves to admit that free markets actually work. Transparency 

in competition will drive down prices and provide lower costs to 

consumers. Even if the critics do not get it, the Medicare beneficiaries 

certainly appear to be getting it. That is why over 3.6 million Medicare 

beneficiaries have already signed up for the new benefit. You told me 

earlier today that there are close to 24 million Americans that have been 

enrolled in the program through one means or another, and enrollment is 

increasing at approximately 250,000 people per week. That sounds like 

a success story to me. If you add that to the fact that the premium which 
3

we estimated was going to be $37 a month is now down to an average of 

$27 a month, that appears to me again to be a successful program. 

 This is a huge undertaking and there are going to be glitches. My 

goal is the same as yours, get rid of those glitches. The committee is 

going to work closely with you and with Dr. Mark McClellan at CMS to 

get these glitches noticed, number one, and solved, number two. We will 

have the first of what will probably be several hearings on that specific 

topic on March the 1st when Dr. McClellan is going to testify before the 

Health Subcommittee. I expect at that hearing that we will ask him some 

very direct questions about where the problems are and what is being 

done or has been done to fix those problems. 

 Another high priority for this committee this year is going to be the 

reauthorization of the National Institutes of Health and its related 

programs. I want to restate my deep commitment to reauthorizing the 

NIH and would ask your assistance in working out the technical details 

so that we can enact this long overdue legislation. In addition, this 

committee needs to authorize the Ryan White Care Act. I believe that 

funding unauthorized programs is not a responsible practice and I 

anticipate that the committee will work to reauthorize that program this 

year. 

 I also intend to work with you and your agency on ways to continue 

to reform Medicare reimbursement and particularly the focus on position 

payment reform. In order to preserve access to Medicare services for 

future generations, we must look at how we are spending our Medicare 

dollars today and what the incentives are to our physician community to 

continue to provide quality health programs and care for our senior 

citizens. Another priority of the committee is going to be to work with 

you and your agency on the proposals outlined in the Administration’s 

budget to provide consumers with greater access to comparative price 

and quality data about their health care providers. I could go on but my 

time has expired. 

 Welcome to the committee and we look forward to your testimony 

and the questions that follow it as soon as every member has been given 

a chance to make an opening statement. With that, I want to recognize 

the distinguished Ranking Member of the committee and Dean of the 

House that has served the longest continuous service in the House of 

Representatives, the Honorable John Dingell of Michigan. 

 [The prepared statement of Hon. Joe Barton follows:] 
4

PREPARED STATEMENT OF THE HON. JOE BARTON, CHAIRMAN, COMMITTEE ON ENERGY 

AND COMMERCE

 Good afternoon. Let me begin by welcoming Secretary Michael Leavitt today to the 

Energy & Commerce Committee. We look forward to hearing him testify about the 

Administration’s Fiscal Year 2007 Health Care Priorities. 

 First, Mr. Secretary, I want to thank you for your assistance in developing the 

important reforms we put into place for the Medicaid program starting this year. As a 

former governor yourself, you understood and appreciated the need to improve this 

program. Through passage of the Deficit Reduction Act, we will sustain Medicaid for 

those people who often need health care the most and can afford it the least. I want many 

more Americans to get their health care through good jobs in a thriving economy instead 

of from a government welfare program, but we will always need Medicaid to help the 

poor and disadvantaged. The reforms we adopted to rescue the program from the threat 

of financial collapse are the same ones that Democratic and Republican governors all 

requested. I look forward to working with you to see that the governors get the tools they 

need to better manage the program and deliver its benefits to the poor of their states. 

 I want to briefly highlight at least some of the changes in the law that have not 

recently received the public attention that they deserve. According to the Congressional 

Budget Office, 115,000 disabled children covered by the Family Opportunity Act will 

receive improved health care services. The new law will provide access to new home and 

community based care to 120,000 individuals; and it will facilitate 100,000 nursing home 

residents to return to their communities through the Administration’s Money Follows the 

Person Demonstration. These are the true results of Medicaid reform –better access to 

better care for those who most need our assistance. 

 There is still much to be done to improve long-term care service delivery and 

financing as well as to promote Medicaid managed care. I have received the 

Administration’s proposals regarding additional improvement to the Medicaid program 

and I look forward to working with you this year on them. 

 This year the Secretary and the Administration also are required to administer the 

new Medicare prescription drug benefit. Making this program succeed is a high priority 

of yours, and it is a high priority of mine, too. 

 Since it began, critics have tried to make patients believe that they are not smart 

enough to understand the new Medicare drug benefit, that it provides inadequate 

coverage, and that signing up isn’t worth their time because it cannot possible save them 

a dime. The critics are simply wrong. They were wrong when they complained about the 

Medicare prescription drug card. They were wrong when they said nobody would offer 

any insurance plans. And they are wrong now. 

 Some sense political advantage in condemning the program, and others can’t bring 

themselves to admit that free markets, transparency and competition will drive down 

prices and provide lower costs to consumers. Even if the critics don’t get it, Medicare 

beneficiaries certainly do. That is why over 3.6 Million Medicare beneficiaries have 

already signed up for the new benefit. That is also why the premiums that these 

beneficiaries are paying have dropped from the initial estimate of $37 down to an average 

of $25 per month. 

 The implementation of this new drug benefit was a huge undertaking, and it has had 

its share of glitches. My goal is the same as yours: Get rid of the glitches. The 

Committee will work closely with the Secretary and Dr. Mark McClellan at C-M-S to get 

problems noticed, examined and solved, and to do it all sooner instead of later. We will 

have the first of what will likely be several hearings on this topic on March 1st, when Dr. 

McClellan will testify before the Health subcommittee. I expect that we ask him very 

direct questions about where the problems have been and what C-M-S is doing to fix 

them. The Energy & Commerce Committee and its chairman are committed to doing 
5

whatever it takes to make sure this program provides the benefits that Medicare 

beneficiaries expect and deserve. 

 Another high priority for the Committee will be the reauthorization of the National 

Institutes of Health (NIH) and related programs. I want to restate my deep commitment 

to reauthorizing the NIH and would ask for the Secretary’s assistance in working out the 

technical details so that we can enact this long overdue legislation. In addition, the 

authorization for the Ryan White CARE Act has now lapsed. I believe that funding 

unauthorized programs is not a responsible practice, and I anticipate that the Committee 

will work to reauthorize these programs this year. 

 I also intend to work with you this year on ways to reform Medicare reimbursement, 

and particularly focus on physician payment reform. In order to preserve access to 

Medicare services for future generations, we must look at how we are spending our 

Medicare dollars today and what are the incentives for providing quality health care. 

 Another top priority of the Committee will be to work with you on the proposals 

outlined in the Administration’s budget to provide consumers with greater access to 

comparative price and quality data about their health care providers. I believe that with 

the development of health savings accounts and similar initiatives that encourage patients 

to become consumers, we have the potential to revolutionize the delivery of health care in 

this country. If these models are to succeed, however, we absolutely must be able to give 

patients the tools that they need to become smarter consumers. 

 As Chairman of this committee, I plan to work with President Bush, Secretary 

Leavitt, Members of Congress, and our health care colleagues to work to ensure our 

citizens continue to have access to the best health care in the world. Thank you again, 

Mr. Secretary, for appearing here today. I look forward to hearing your testimony. 

 MR. DINGELL. Thank you, Mr. Chairman. 

 Good afternoon, Mr. Secretary. 

 Forty-six million Americans are uninsured. Six million more 

Americans have become uninsured since President Bush took office. 

The public health infrastructure and all of its programs are limping. The 

President’s Budget moves us in the wrong direction. 

 After signing into law reconciliation legislation with $28 billion in 

cuts to Medicaid over the next ten years, the President has returned with 

a fiscal year 2007 budget that makes another $42 billion in cuts to a 

program that provides health insurance for more than 58 million 

Americans. The Congressional Budget Office already documented that 

the first round of cuts would cause thousands to lose coverage each year. 

These additional cuts will likely have that same effect on thousands 

more. 

 Second, the Administration is proposing billions in tax breaks to 

encourage individuals and families to move out of decent employersponsored coverage into high-deductible health plans in the individual 

insurance market. For a “mere” $156 billion a year we will have a 

program but will erode employer coverage, discriminate against the sick, 

provide little benefit to those of modest means, and increase the deficit. 

 Third, the Medicare budget again moves in the wrong direction. The 

budget fails to include any proposals to fix the documented problems in 

the Part D--D for disaster--drug benefit. The budget also fails to include 
6

one dime to address the pending Medicare payment cuts. According to 

the American Medical Association, physicians will see payment cuts 

totaling $102.5 billion in the next seven years. This has been ignored by 

the Administration. Likewise, the budget does not provide any of the 

MedPAC recommended cuts to HMO and private plan payments which 

alone would save $50 billion over that same time. Instead, it proposed 

$105 billion in cuts over the next 10 years to hospitals, skilled nursing 

home facilities, and other providers all of which are vital parts of the 

Medicare’s Fee-for-Service Program that enrolls the vast majority of 

seniors today. 

 The President also proposes another increase in Part B premium for 

beneficiaries, the third premium increase brought forward by 

Republicans since 2003. The budget also proposes an automatic cut in 

provider payments at any time general revenue is funding more than 45 

percent of the program. 

 Fourth, the Centers for Disease Control and Prevention, the National 

Institutes of Health, and the Health Resources and Services 

Administration, the Food and Drug Administration, and other Public 

Health Services agencies all play an important role in the protection of 

public health, yet they get the back of the Administration’s fiscal hand in 

this budget. 

 The Food and Drug Administration is supposed to protect us every 

day from bad food, unsafe pharmaceuticals, and other dangers of this 

sort. The budget does not give us enough to protect against counterfeit 

drugs, adulterated food, or unsafe medical devices. The budget does not 

do enough to support people training, equipment, and facilities that we 

rely on to protect our homeland from public health emergencies that are 

caused by man or nature. 

 The budget does not do enough to support the discovery of new and 

improved treatments and cures for cancer, diabetes, stroke, and 

Alzheimer’s, and other diseases that afflict so many of our Americans. 

In this budget, the National Institutes of Health will sponsor less research 

this year than it did last year. Clearly that is wrong. The community 

health centers remain under funded, as do the other health safety net 

public health programs. 

 Finally, the Administration is missing in action concerning the 

catastrophic healthcare situation facing the greater New Orleans region 

still hurting from Hurricane Katrina. Simply put, almost six months after 

the storm, with billions appropriated for recovery efforts, thousands of 

Americans are now receiving healthcare services in such facilities as 

tents and a city zoo. Americans deserve better from this budget. They 

expect better. And I hope we are able to get it for them. 

 Thank you, Mr. Chairman. 
7

 CHAIRMAN BARTON. Thank you, Mr. Dingell. 

 Mr. Upton from Michigan for one minute as soon as I get the clock 

set. 

 MR. UPTON. Thank you, Mr. Chairman. 

 I will use my time early here. Thanks for convening today’s hearing, 

and I welcome the Secretary to be with us for sure. 

 I have to say that I know that putting together the HHS budget 

proposal must be a daunting one and some would say thankless task with 

many competing pressures and imperatives facing our country today and 

the difficult choices that obviously have to be made. 

 There are some very wise investment decisions reflected in the 

President’s Budget. I was particularly encouraged by the proposal to 

provide a $55 million increase in funding for the Office of the National 

Coordinator for Health Information Technology to spur the widespread 

use of electronic medical records and other forms of Health IT. I am 

strongly committed to that goal because of the promise that Health IT has 

to substantially improve the quality, efficiency, and cost effectiveness of 

our Nation’s health care delivery system. A recent Rand study found the 

widespread use of Health IT would save an estimated $168 billion a year, 

B as in big, money that can be reinvested to further strengthen our 

delivery system. 

 Obviously, I have some questions about the tough decisions you had 

to make related to the NIH budget and CDC budget and I look forward to 

your answers this afternoon. 

 I yield back the balance of my time. 

 CHAIRMAN BARTON. We thank the gentleman. 

 The gentleman from California, Mr. Waxman. 

 MR. WAXMAN. Thank you, Mr. Chairman. 

 Mr. Secretary, good to see you. Unfortunately, I am not looking 

forward to your presentation because I think the budget that you are 

presenting to us is not a good budget. After pushing through policies in 

the Deficit Reduction bill that took away protections for seniors and 

children and people with disabilities all in the name of helping States 

meet the financial burden of Medicaid, now the Administration brings us 

a budget that shirks massive cost onto the States. The agenda is clear, 

push the cost onto the States and let the States shift them onto the 

beneficiaries and once again we ask the least able to bear the burden. 

 We have 46 million uninsured, yet this budget cuts support for 

Medicaid. It undermines the strength of basic Medicare. It fails to 

address the difficult problems that have become glaringly apparent in the 

Prescription Drug Program. It endorses massive raids on the public 

treasury with tax breaks for health savings accounts that undermine 

employer base coverage which slashes funds for health care programs at 
8

work. It shortchanges NIH in its life saving research. It cuts funds for 

State programs that provide for child immunizations. 

 I only have a minute to tell you a few of the things I dislike about 

this budget but I am always pleased to see you. 

 CHAIRMAN BARTON. Thank you. 

 The Health Subcommittee Chairman, Mr. Deal of Georgia. 

 MR. DEAL. Thank you, Mr. Chairman. 

 Mr. Secretary, I want to thank you for your superb service in helping 

all of us as we work with the Deficit Reduction Act. You were 

exemplary as was your staff. You are the kind of public servant that I 

think all of us take pride in acknowledging your service and it has been a 

difficult task. 

 I know that some of the questions today may evolve around the 

Medicare Part D and for the benefit of my colleagues, I would simply 

point out that we are going to have a full hearing on that subject on 

March the 1st. Dr. McClellan is scheduled to testify. We will also have 

representatives from the insurance community, representatives from the 

pharmacy community, as well as perhaps representatives from the 

constituent base itself to testify at that hearing. And I think that will 

amplify many of the questions that perhaps will surface today and we all 

look forward to that hearing. 

 Once again, I thank you for being here today and I look forward to 

your testimony. 

 I yield back, Mr. Chairman. 

 CHAIRMAN BARTON. We thank the gentleman from Georgia. 

 Does the gentleman from New Jersey wish to make an opening 

statement, Mr. Pallone? 

 MR. PALLONE. Thank you, Mr. Chairman for holding this hearing. 

 The priorities laid out in the President’s Budget are exceedingly 

misguided in my opinion and prove yet again that when it comes to 

health care, Republicans still do not get it. The President’s proposal once 

more puts Medicare and Medicaid on the chopping block, makes radical 

changes to our health insurance market, and eliminates programs that 

provide critical health services to those in need. At the same time, the 

President has proposed $285 billion in tax cuts that largely benefit the 

highest of earners. And make no doubt about it, if enacted, this budget 

will leave gaping holes in our Nation’s social safety net and endanger our 

most vulnerable citizens while further enriching the wealthiest 

Americans. Once you break through the President’s rhetoric, it becomes 

clear that the only health care priority for this Administration is to divest 

itself of any responsibility to ensure every American has access to 

affordable and quality health care. 

 Thank you, Mr. Chairman. 
9

 CHAIRMAN BARTON. I thank the gentleman from New Jersey. 

 The Chairman of the Oversight and Investigations Subcommittee, 

Mr. Whitfield of Kentucky. 

 MR. WHITFIELD. Mr. Chairman, I will waive. 

 CHAIRMAN BARTON. Okay, Mr. Norwood of Georgia. 

 MR. NORWOOD. Thank you very much, Mr. Chairman, and I will be 

very brief. 

 Secretary Leavitt, we are all very pleased and proud of you and 

appreciate all the hard work you have. I believe you have probably one 

of right now the hardest jobs in Washington, D.C., between the Avian 

Flu and dealing with the Medicaid and Medicare and all that and I thank 

you for the way in which you have handled it and handled yourself. I 

look forward to your testimony. 

 CHAIRMAN BARTON. The Ranking Member of the Health 

Subcommittee, Mr. Brown of Ohio. 

 MR. BROWN. Thank you, Mr. Chairman. 

 Mr. Secretary, I know you have strongly held views and are 

exceptionally dedicated to your job. We thank you for that. 

 I wish I could comment the Administration’s stewardship equally 

commend over our health care system. First, they write a prescription 

drug law that bypassed the popular reliable and efficient insurance 

program we call Medicare in favor of complete and utter chaos. The 

drug industry wanted private drug plans. The privatization zealots 

wanted private drug plans so Medicare beneficiaries were forced into 

private drug plans. Medicare beneficiaries were simply an afterthought. 

Then the Administration writes a budget reconciliation bill that takes 

medically necessary health care away from the poor, the sick, and the 

elderly while preserving billions in overpayments, not just payments, but 

overpayments to HMOs. That is not compassion, it is not conservative, 

it is negligent and it is fiscally corrupt. Now the Administration 

proposes a budget that turns our health care system into a country club 

where the healthy and wealthy get tax breaks, the poor and sick can get 

in line at the free clinic. Whether it is the drug bill, the reconciliation 

package, or the President’s Budget, it is clear that the wellbeing of 

everyday Americans carries no weight with Republican leadership. 

 Mr. Chairman. 

 CHAIRMAN BARTON. I thank the gentleman. 

 The chair notes the presence of Dr. Gingrey, a visitor to the 

committee and Member of the full House. We welcome him. 

 The chair asks Mr. Ferguson of New Jersey if he wishes to make an 

opening statement. 

 MR. FERGUSON. I do, thanks, Mr. Chairman. 
10

 Mr. Secretary, thank you again for being here. We welcome you and 

we certainly appreciate your service. I know how hard you have worked 

on these implementation issues with Part D. You have been traveling the 

entire country. You have been working tirelessly and we thank you very 

much for those efforts. 

 I have two quick points of interest that I want to just raise. One is 

how the budget treats pandemic preparedness. We continue to see 

reports of Asia and Europe about the spread of Avian Flu. Thankfully it 

has been limited to birds and a few human cases have been found 

primarily are people who handle fowl. But I know you would agree, Mr. 

Secretary, that it remains a matter of time before this or some other 

pandemic strain mutates and it is spread from person to person. I am 

very interested and concerned about how the requested funds will be 

spent for combating the flu and the spread of the flu. 

 I also want to just raise a second issue about a new dual eligible low 

income subsidy access problem on the horizon for Medicare Part D, 

specifically for people who need vaccines. New vaccines will now be 

covered under Part D which may create problems for the coverage. 

Given that vaccines are largely administered in physician’s offices and 

many vaccines need special storage requirements, beneficiaries in most 

cases will not be able to purchase them are regional pharmacies like 

mostly all other Part D covered drugs. Currently the guidance given 

requires the beneficiaries to pay the charges out of pocket at the 

physician’s office and then somehow seek reimbursement from their 

drug plan. In effect, their co-pay protections are not relevant or workable 

at this time. 

 CHAIRMAN BARTON. The gentleman’s time has expired. 

 MR. FERGUSON. Thank you, Mr. Chairman. 

 CHAIRMAN BARTON. All right, the gentleman from Illinois, Mr. 

Rush. 

 MR. RUSH. Thank you, Mr. Chairman. 

 Mr. Chairman, last year’s proponents of the budget touted the cost of 

Medicaid and other low income programs as “reform.” Last year, I 

asked the question why is the majority for “reform” always focused on 

programs that affect the neediest, most vulnerable members of our 

society. No doubt this year with this budget and the billions of dollars in 

cuts from Medicaid, Medicare, and other social programs the 

Administration will similarly characterize these funding cuts as 

“reforms.” And so like last year, I again ask the question, why is it then 

when it comes to reform, this Administration always wants to reform 

safety net programs and other low income initiatives that protect the 

poor, the elderly, the disabled, and our children? Why aren’t any 
11

reforms directed towards wasteful programs and initiatives that benefit 

the wealthy and the powerful? 

 Mr. Chairman, I do welcome Secretary Leavitt to this committee. 

 CHAIRMAN BARTON. We thank you, Mr. Rush. 

 The gentleman from Idaho. 

 MR. OTTER. Mr. Chairman, I waive my time and submit my 

statement for the record. 

 [The prepared statement of Hon. C.L. “Butch” Otter follows:] 

THE PREPARED STATEMENT OF THE HON. C.L. “BUTCH” OTTER, A REPRESENTATIVE IN 

CONGRESS FROM THE STATE OF IDAHO

 Thank you, Secretary Leavitt, for joining us today to discuss the direction of 

healthcare in this country for the upcoming fiscal year. I’m glad that we have the 

opportunity to hear from you about the priorities that the Administration has set for this 

year and to share with you those areas which are particularly important to us. 

 Idahoans are overwhelmingly concerned with the high cost of health insurance and 

rising number of people who do not have healthcare coverage. This issue invariably 

comes up nearly every time I talk with a constituent, whether he or she is a small business 

owner, a religious volunteer, a health care worker, or a concerned parent. They share 

with me their alarm over the growing cost of healthcare and their fear that they and those 

they love will be unable to afford or choose the care that they need. 

 Healthcare issues are extremely complex, and the cost of health insurance plays a 

major role in the high levels of uninsured in this country. We must look for innovative 

solutions to this problem, and I am pleased at the President’s interest in further 

developing Health Savings Account choices for Americans. The creation of tax-free 

HSAs continues to have a profound impact on our healthcare industry, allowing 

Americans to have more control over their health care and providing coverage to those 

who might not otherwise have access to a good insurance policy. As an advocate of 

personal responsibility and giving individuals more power to make the best healthcare 

choices for themselves, I wholeheartedly support the expansion of HSAs into government 

healthcare programs like Medicare and Medicaid. 

 In addition, I greatly support the President’s proposals aimed at encouraging 

individuals to purchase health insurance. As a businessman, I was able to deduct 100 

percent of what it cost me to provide health insurance for my employees. Yet the law 

currently prohibits a single working mother without an employer-sponsored health plan 

from doing the same. We need to work to create an environment in which health 

insurance is more affordable, and extending tax benefits to individuals for the purchase of 

health insurance or a health savings account is a big step in the right direction. 

 Secretary Leavitt, I look forward to hearing about these proposals in more detail and 

hope to work with you to ensure that quality and affordable health coverage options are 

available to people in my state. 

 CHAIRMAN BARTON. All right, the gentleman from Texas, Dr. 

Burgess. 

 MR. BURGESS. Thank you, Mr. Chairman. 

 I do have a statement I will submit for the record but a few points I 

want to make in the minute I have and I agree with you, Mr. Secretary, 

these are important investments for the future. I am a big believer in 

consumer oriented, consumer directed health insurance, and I believe 
12

there is no greater portability than allowing someone to own their own 

policy. But in order for consumers to make accurate decisions in regard 

to cost, price, and quality, we are going to have to increase the 

transparency in the medical system in this country. Health information 

technology, something that you have championed and I do agree with, it 

has taken a long time to get that program up and running and it will cost 

significant dollars but I support that effort. I would urge you, though, we 

need to keep our best and brightest physicians involved in the game, 

particularly in Medicare, if this system is to pay the dividends we expect 

it to. The same could be said for pay for performance. We have got to 

find a way to keep physicians my age and your age in the system and 

providing for our patients. These are the best trained, the most 

experienced physicians. They are leaving in droves right now because of 

reimbursement. 

 Finally, I just have to say as far as the Gulf Coast is concerned, I got 

a Blackberry earlier today about the reopening of the HCA Tulane 

Hospital. Mayor Ray Nagin asked them what was in their coffee. I do 

not know what you are taking at Tulane but I want some of that. Mr. 

Secretary, it is called the private sector. It is called American ingenuity 

and investment and it works every time it is tried. 

 CHAIRMAN BARTON. The gentlelady from California, Mrs. Eshoo. 

 MS. ESHOO. Thank you, Mr. Chairman. I hope you are taking good 

care of yourself. 

 CHAIRMAN BARTON. I am, I lost about 18 pounds. 

 MS. ESHOO. Good for you. Well, continue doing that. We want you 

to be well and stay well. 

 CHAIRMAN BARTON. I recommend highly fat-free crackers and 

every form of chicken known to man. 

 MS. ESHOO. Good. That is great. 

 Well with that, welcome Mr. Secretary. It is good to have you 

before the committee today and I am sure that we are going to have many 

other discussions as well this year. 

 First, along with many of my colleagues on the committee, I have 

deep concerns about many, many parts of the President’s Budget. I think 

that there are some opportunities that are really lost that the President 

does not speak to but I hope that the Congress and especially this 

committee will rise to the occasion and hopefully with your cooperation 

on a number of fronts. 

 One of them, one of the spots in the budget where I do find some 

good news is that there is support for personalized medicine and in the 

role genetics will play in health care. And to be specific in that area, the 

statements of the Administration’s policy on S. 306, the Genetic 

Information Non-Discrimination Act of 2005. To my colleagues, that 
13

passed unanimously in the Senate and the Administration obviously 

supports it and I thank you for that, Mr. Secretary. 

 I hope that you will be a positive influence-- 

 CHAIRMAN BARTON. The gentlelady’s time has expired. 

 MS. ESHOO. If I might just finish this statement, this sentence. I 

hope that you will be a positive influence on members of this committee 

to support that legislation, which is H.R. 1227 here in the House, to 

accomplish it. Thank you. 

 CHAIRMAN BARTON. The gentlelady from Tennessee, Mrs. 

Blackburn. 

 MS. BLACKBURN. Thank you, Mr. Chairman. 

 You know, I think it is unfortunate that some of our colleagues today 

are trying to claim that budget challenges are related to tax reductions 

from ‘03 and not out of control or unaccountable Washington spending. 

So just for the record, according to the CBO in fiscal year 2005, the 

Federal Government received more revenue than in any other year. 

Revenue has increased $274 billion from ‘04 to ‘05. The tax reductions 

by this Congress have not crippled Federal programs; they have indeed 

provided more money for Federal programs. 

 And I do not agree with everything in the President’s Budget. We 

must continue working to reform and renew some of the entitlement 

programs that are restraining and work on restraining our Federal 

spending. And I appreciate the budget steps in that direction and I think 

it is unfair to the American people to hide the fact that our existing health 

and entitlement programs are on a sustainable path because they are not, 

they are on an unsustainable path and I thank the Chairman and welcome 

the Secretary and look forward to working with you on the situation. 

 CHAIRMAN BARTON. I thank the gentlelady. 

 The gentleman from New York City, Mr. Engel. 

 MR. ENGEL. Thank you, Mr. Chairman and glad you are looking so 

well and you see, you can eat lots of chicken and not worry about bird 

flu. 

 I welcome Mr. Secretary and thank you for coming. I also want to 

associate myself with those on this side of the aisle who are looking at 

the budget and feel very badly about it. I feel that we are going in the 

wrong direction in terms of providing health care. The uninsured are 

becoming more and more, and cuts to the needy and working people are 

growing with leaps and bounds and I think this is just a very, very bad 

direction. 

 With all due respect to the gentlewoman who just spoke before me, it 

is clear to us that the tax cuts are the reason why the poor have to suffer 

in terms of getting less and less health care. This Administration has 

made its priority the priority for tax cuts and war and therefore there is 
14

nothing left to benefit the American people in terms of health care, in 

terms of education, in terms of childcare, and all the things that the 

American people know. So I believe that the priority of the 

Administration ought to change, ought to be considered with health care. 

More for health care and less for tax cuts. And while the tax cuts are not 

the source of the entire problem, it is clear that there is so much more 

revenue coming in-- 

 CHAIRMAN BARTON. The gentleman’s time has expired. 

 MR. ENGEL. --therefore we have these widening deficits that are 

going sky high and crazy. That has to stop. 

 Thank you, Mr. Chairman. 

 CHAIRMAN BARTON. The gentleman from Florida, Mr. Stearns. 

 MR. STEARNS. Thank you, Mr. Chairman. 

 I am delighted to have the Secretary here and we are all anxious to 

hear from him. 

 I appreciate your staff working with my staff over the past few years 

on a Cash and Counseling delivery system that we provided that came 

from Governor Jeb Bush and is used in Medicaid and we have 

incorporated into Medicare to provide beneficiaries with flexibility and 

self design of their own personal care. And I am pleased to see Cash and 

Counseling provision in major pieces of legislation this committee has 

moved, in first the demonstration in Medicare, and then this year in the 

Deficit Reduction Act in Medicaid where we made it a permanent option 

for Governors. 

 Mr. Secretary, in the short time I have left, I just want to talk to you a 

bit about the NIH budget. I support Chairman Barton’s plans for the 

committee to reauthorize the NIH to make it flexible and more 

accountable for our future needs. I think we all have to say to ourselves 

we doubled NIH so I think we better stop just a second and take a breath 

and say, “Are Americans getting a good return on investment here and 

does the director have the authority it needs to manage the program as it 

should be?” 

 So I just leave you with that thought and I thank you, Mr. Chairman. 

 CHAIRMAN BARTON. Thank you. 

 The gentleman from Texas, Mr. Green. 

 MR. GREEN. Thank you, Mr. Chairman for you and Mr. Dingell for 

holding this hearing on the HHS budget proposal and I would like to 

welcome the Secretary. 

 My concern I guess is the health savings account. It seems like HHS 

has worked for only small portion by 46 million uninsured but they 

cannot reduce our uninsured significantly. They worked for a significant 

segment of our population and I notice in the poll a week ago that the 

number one domestic concern people have is health care. 
15

 One program I do agree with the Administration on and I--we 

support the Health Community Centers Program. I applaud the 

Administration for increasing funding for health centers and have proven 

so effective in delivering primary and preventative care to uninsured and 

underinsured. I am disappointed that HCAP Program which helps put 

together collaboratives to develop these health centers are again not in 

the budget but I hope to be able to work with the Appropriations 

Committee and the House and Senate to do that. I am concerned, like a 

lot of folks are, about the deep cuts in children’s, graduate, and medical 

education and health preventions but I am looking forward to working 

with the appropriators to restore some of the funding. 

 But Mr. Secretary, I particularly want to thank you and Dr. 

McClellan for coming to Houston shortly after Labor Day. I know you 

were there on Labor Day and with the resources from HHS and the 

Public Health Service and we had a couple of hundred thousand folks, 

evacuees and providing the service and I look forward to working with 

you on our uninsured problem. 

 Thank you, Mr. Chairman. 

 CHAIRMAN BARTON. Thank you. 

 The gentleman from Texas, Mr. Hall. 

 MR. HALL. I was just reading the statement for the first time that I 

am going to make here so I will read it the first time, Mike, to you if you 

do not mind. 

 I do thank you for coming. The health care spending, of course, is 

one of the really major areas, one of the largest areas of the Federal 

budget and it is also the most important to citizens of our country. The 

money that we spend directly affects millions of people and it is 

important that America remain the leader in health care research and 

innovation for years to come. And as we all know, health care spending 

is only projected to increase in the future. There is just no question there 

is no way around that. We need to find ways to be fiscally responsible 

with our health care spending while delivering better outcomes. I know 

you are working toward that too and we have had meetings with you and 

you have been very generous with your time with us, and with this 

committee. So we are all on one road, and to this end I am very pleased 

to see that the President’s Budget contains an increase for health 

information technology. 

 There are a lot of inefficiencies in the system that need to be 

addressed that more people can be covered with fewer resources. A 

recent study by the Rand Corporation estimated that if we did more to 

adopt health information technologies then we could save $77 billion a 

year and we would also deliver better health outcomes from reduced 

areas. As I understand as HHS and NICHT are partnering to develop 
16

common standards to allow systems to work together seamlessly while 

protecting patient privacy. 

 CHAIRMAN BARTON. The gentleman’s time has expired. 

 MR. HALL. And I applaud these efforts and I yield back my time. 

 CHAIRMAN BARTON. The gentleman yields back. 

 MR. HALL. Good to see you. 

 CHAIRMAN BARTON. Ms. Capps of California. 

 MS. DEGETTE. Ms. DeGette. I am going to waive my opening 

statement. 

 CHAIRMAN BARTON. Okay. I was going in order of appearance and 

I saw you come in after the gavel. Did you come in and leave and come 

back? Okay, then the gentlelady from Colorado is recognized to waive 

her opening statement. 

 MS. DEGETTE. I waive my opening statement. 

 CHAIRMAN BARTON. All right. The gentlelady is recognized, Mrs. 

Capps. 

 MS. CAPPS. Mr. Chairman, thank you for holding this hearing. I am 

going to submit my opening statement for the record and welcome the 

Secretary. I look forward to the discussion period. 

 [The prepared statement of Hon. Lois Capps follows:] 

THE PREPARED STATEMENT OF THE LOIS CAPPS, A REPRESENTATIVE IN CONGRESS FROM 

THE STATE OF CALIFORNIA

Thank you Mr. Chairman. 

I am glad that we are holding this hearing today in order to discuss our HHS budget 

priorities for FY2007. 

Unfortunately, though, the President’s proposals reflect a lack of real investment for 

our nation’s true current and future health needs. 

NIH is being level-funded, which is essentially a cut. I worry about the future of 

medical research if we cannot even keep up the pace with today’s needs, let alone 

tomorrow’s. 

The President proposes cutting cancer research, yet we finally have evidence that 

our efforts are working and are beginning to see a declining death rate for cancer. 

How can we justify delivering a setback to those efforts? 

Nurse education funding is being level-funded, which is also an essential cut. 

Back in 1974, Congress appropriated the equivalent of 609 million in today’s dollars 

for nurse education programs. 

And while the Administration is emphasizing preparedness for pandemic flu and the 

threat of bioterrorism, it seems to be ignoring the fact that nurses are first responders and 

will be critical to those efforts. 

There simply aren’t enough nurses now and there certainly won’t be enough in the 

future if we cut funding from training and retention programs. 

I hope today we can refocus attention to the true priorities of our public health 

infrastructure and ensure that we are doing the absolute best we can to serve America’s 

health needs. 
17

CHAIRMAN BARTON. All right. Seeing no Republicans, oh, Mr. 

Murphy of Pennsylvania, do you wish to make an opening statement? 

 MR. MURPHY. Real quick, sir, thank you. All I have is one minute 

right? 

 CHAIRMAN BARTON. Yes, sir, you got one minute. 

 MR. MURPHY. Mr. Chairman, Mr. Secretary, thank you. 

 We all know we have one of the best health care systems available 

with great dedicated folks, but we also recognize that some of the issues 

being presented in the President’s Budget is also looking at some reform. 

When we talk about making reforms here with such things as health 

information technology, working on community health centers, it is 

important that we are aware of the idea that these things can save lives by 

the thousands and save money by the tens of billions of dollars. What 

that really means we have to stop just focusing upon who is paying and 

we look at what we are paying for. And I hope though that some of the 

issues being addressed today rather than simply reducing care or having 

people talk about reducing care, one of the things that we have done is I 

am the co-chairman of the Congressional Health Care Caucus. It has 

identified over $300 billion of savings that we can have in the health care 

arena with reforms and it is not a matter of reducing care, it is a matter of 

doing it better and I certainly hope today in your comments and your 

continued commitments, Mr. Secretary, we will continue on those things 

together. Thank you very much. 

 Thank you, Mr. Chairman. 

 CHAIRMAN BARTON. Does Mr. Markey wish to make an opening 

statement? 

 MR. MARKEY. I wish to waive. 

 CHAIRMAN BARTON. Okay. Mr. Allen? 

 MR. ALLEN. Thank you, Mr. Chairman and welcome Mr. Secretary. 

 The Administration’s budget continues on a path of dismantling the 

health care infrastructure in our country and will leave more people 

uninsured and more employers unable to afford health care coverage for 

their employees. The Administration proposes to spend $156 billion 

over 10 years on a package of mostly recycled policies that promote 

health savings accounts and high deductible health plans. It is an attempt 

to move people from shared risk and shared pooling arrangements to 

fend for themselves in the more expensive and volatile individual 

market. 

 Recent studies indicate that the expansion of HSAs would in fact 

increase the number of uninsured and undermine the existing employer 

sponsored insurance system. To cut wasteful Federal spending, this 

Administration should simply eliminate the well documented 

overpayments to Medicare HMO’s and insurance companies and allow 
18

the Federal Government to negotiate lower prices for Medicare 

prescription drugs. But that agenda I suspect will have to wait for 

another Administration. 

 I thank you for being here. 

 CHAIRMAN BARTON. Does Mr. Bilirakis wish to make an opening 

statement? 

 MR. BILIRAKIS. No, I will just offer an opening statement into the 

record. I waive. 

 [The prepared statement of Hon. Michael Bilirakis follows:] 

THE PREPARED STATEMENT OF THE HON. MICHAEL BILIRAKIS, A REPRESENTATIVE IN 

CONGRESS FROM THE STATE OF FLORIDA

 Thank you, Mr. Chairman. 

 I am pleased that we are here to examine the Administration’s Fiscal Year 2007 

budget proposal for the Department of Health and Human Services. 

 I am eager to hear your insights, Mr. Secretary, on the health care provisions in the 

Administration’s budget proposal. I am especially interested in learning how HHS 

continues to address problems experienced by Medicare beneficiaries enrolling in the 

prescription drug benefit. 

 This new benefit represents the most significant change to Medicare since the 

program was created. I supported it then, as I do now, because I believe that it will help 

provide much needed assistance to many Medicare beneficiaries, especially the poorest, 

sickest, and those with the highest drug costs. 

 And while those of us who helped create it could reasonably expect there to be 

certain administrative and management challenges associated with its implementation, I 

must tell you that I have heard from constituents who have told me that they have had 

trouble getting the prescriptions they need. 

 I am eager to hear what steps HHS has taken to ensure that seniors who sign-up for 

prescription drug coverage get the medicine they need, when they need it, at the proper 

price. I am hopeful that the problems about which I have heard are being addressed so 

that my constituents can obtain affordable prescription drugs. 

 I look forward to working with you, Mr. Secretary, and members of this Committee 

as we continue to monitor implementation of the prescription drug benefit and determine 

how to meet the health care needs of the American people now and in the future. 

 Thank you, Mr. Chairman. 

 CHAIRMAN BARTON. Does Mr. Walden wish to make an opening 

statement? 

 MR. WALDEN. Mr. Chairman, I just look forward to hearing the 

Secretary’s remarks. 

 CHAIRMAN BARTON. Does Mr. Terry wish to make an opening 

statement? He waives, too. 

 All right, Mr. Gonzalez? 

 MR. GONZALEZ. Waive opening. 

 CHAIRMAN BARTON. Mr. Inslee? 

 MR. INSLEE. Waive opening. 

 CHAIRMAN BARTON. Ms. Baldwin? 
19

 MS. BALDWIN. Thank you, Mr. Chairman and Mr. Secretary. 

 Our Nation is in the midst of a health care crisis. Forty-six million 

Americans are uninsured, an additional 16 million are underinsured. In 

aggregate, 62 million Americans have either no insurance, sporadic 

coverage, or have insurance coverage that leaves them exposed to high 

health care costs. This is unacceptable. But what is even more 

unacceptable is that the President’s Budget proposes harsh cuts to both 

Medicare and Medicaid, programs that actually do provide affordable 

comprehensive health care. And it offers a reform proposal that will 

make many Americans worse off. 

 I want to say just a few words about health savings accounts. In my 

opinion, the President is proposing to do to health care what he proposed 

last year to do to Social Security and that is moving from a system whose 

fundamental philosophy is promoting the common good--recognizing 

that we are all Americans and we are all in this together--to a philosophy 

of each man, woman, and child for themselves, sink or swim if you can. 

We must recommit as a Nation to a fight for the common good including 

health care for every American and I believe this budget brings us further 

from that goal. 

 Mr. Chairman, I yield back, thank you. 

 CHAIRMAN BARTON. The gentlelady yields back. 

 Mr. Shimkus? 

 MR. SHIMKUS. Waive. 

 CHAIRMAN BARTON. Mr. Stupak? 

 MR. STUPAK. Thank you, Mr. Chairman. 

 Mr. Secretary, welcome. Briefly, Mr. Secretary looking through 

your testimony you did not say anything about New Orleans. We were 

down there the 24th through the 26th of January and health care is dismal 

if you can even call it that. What I see in New Orleans is--and the rest of 

the Gulf Region--is business as usual. There does not seem to be any 

urgency to get health care moving again in New Orleans. I am looking at 

a newspaper article right here from the Times Picayune where people are 

waiting nine and a half hours to get into emergency rooms. But in our 

hearing, their representatives said that the Secretary had a vision of 

health care for New Orleans. Hopefully during your oral testimony you 

can tell us what that vision is and what do we do to get medical 

profession and medicine and health care delivery being done in New 

Orleans in the rest of the Gulf Region and a more aggressive proactive 

approach my--Secretary, I think would be helpful down there. 

 Thank you, Mr. Chairman. 

 CHAIRMAN BARTON. I thank the gentleman. 

 The gentleman from Maryland, Mr. Wynn. 

 MR. WYNN. Thank you, Mr. Chairman. 
20

 Welcome Mr. Secretary. Thank you for your work over the years. 

Unfortunately I am a little distressed with this budget. First of all, I note 

that you do not have a fix for the problems of the Medicare Prescription 

Drug Program. Our seniors are confused, our seniors are actually losing 

access because of some of the problems with this program. I do not see 

anything to address those concerns. 

 The second problem I am concerned with is basically the severe cut 

$160 billion of Medicaid and Medicare on top of the 50 that was already 

put in the Deficit Reduction Act. The problem being that only shifts the 

problem down to the States. The States are already strapped and so I see 

that as very problematic. 

 But finally the thing I wanted to express concerns about these health 

savings accounts. Over and over people said this so-called cost sharing 

does not work for the people who need it the most. The people who are 

the working poor, the mother with two kids who does not have insurance 

or cannot afford insurance, how is she going to afford a high deductible? 

That issue was never addressed in this proposal and so what you have is 

less usage because of these--with these health savings accounts and more 

long-term costs. 

 So I think there are a lot or problems with this budget. I hope you 

will be able to address some of these issues in the course of your 

testimony. 

 Thank you. 

 CHAIRMAN BARTON. I thank the gentleman. 

 I see no other Member present who has not had an opportunity. The 

chair asks unanimous consent that all Members not present have the 

requisite number of days to put their opening statement in the record. 

Without objection, so ordered. 

 [Additional statements submitted for the record follow:] 

THE PREPARED STATEMENT OF THE HON. BARBARA CUBIN, A REPRESENTATIVE IN 

CONGRESS FROM THE STATE OF WYOMING

 Thank you, Mr. Chairman, for holding this timely hearing. I’d also like to thank 

Secretary Leavitt for joining us here today. I realize what a critical time this is for your 

agency, and I appreciate you making it a priority to discuss our budget concerns. 

 As the Secretary has noted, every program is important to someone, and difficult 

choices have to be made when it comes to distinguishing spending priorities. I am a 

champion of fiscal discipline, but I cannot endorse the cuts the President has 

recommended to rural health care programs. 

 Among the cuts to rural grant funding, the President proposes to eliminate the Rural 

Hospital Flexibility Grants, the Small Hospital Improvement Program, and the Rural and 

Community Access to Emergency Devices programs. His budget also eliminates the 

Rural EMS program and essentially eliminates the Rural Health Outreach Grant Program. 

In total, the President has recommended cutting $133 million in rural health dollars. This 
21

is a humble part of the overall Federal budget, but these funds are critical to states like 

Wyoming, and the citizens I represent. 

 While almost 25% of America’s population lives in a rural area, only 10% of 

America’s physicians serve these areas. The administration has justified these cuts to 

programs within the Office of Rural Health Policy, saying this funding is duplicative. 

Today, I hope to hear explanation of what other programs are supposedly filling this 

need. I would also appreciate being shown where rural-serving health entities may find 

support in the President’s Budget. As a Member of the House Rural Health Care 

Coalition, I support programs that aide access to quality health care for rural America, 

and I will continue to advocate for the funding necessary to support these programs. 

 Again, thank you Chairman for calling this hearing, and I reserve the balance of my 

time. 

THE PREPARED STATEMENT OF THE HON. HILDA L. SOLIS, A REPRESENTATIVE IN 

CONGRESS FROM THE STATE OF CALIFORNIA

• Thank you Mr. Chairman and good afternoon Secretary Leavitt. 

• There is no other issue that is of greater concern to my constituents in East Los 

Angeles and the San Gabriel Valley in Los Angeles County than health care. 

• More than 1 out 3 residents in my district lacks health insurance. 

• As you know, our state and federal governments play a critical role in helping 

to ensure that many low-income families, particularly the young, the elderly, 

and the sick, have some sort of access to medical services. 

• That is why I am so troubled by the President’s Budget proposal, which 

includes deep cuts to Medicare, Medicaid, the State Children’s Health 

Insurance Program (SCHIP), and other vital health programs. 

• At a time when 44 million Americans, including 13 million Latinos, lack health 

insurance, we should not be cutting health programs that benefit families that 

otherwise will not have any health care. 

• In fact, a recent study by the Congressional Budget Office (CBO) of the 

Medicaid cuts in the reconciliation bill found that sixty percent of those losing 

coverage due to new Medicaid premium charges would be children! 

• Our nation’s economic health depends on the good health of its families. 

• I urge the Administration to reevaluate its budget proposal and the negative 

impact it would have on the Latino community and other communities across 

this country. 

• Thank you, again, Mr. Secretary, for your presence here today, and I appreciate 

your attention to these concerns. 

THE PREPARED STATEMENT OF THE HON. TED STRICKLAND, A REPRESENTATIVE IN 

CONGRESS FROM THE STATE OF OHIO

Thank your Mr. Chairman. 

Mr. Secretary, I have deep concerns that the President’s Budget we have before us 

today will do more harm than good to the American people and their ability to access 

good quality and affordable health care. This budget would lead to increases in Medicare 

premiums, cut funds for Medicare and Medicaid, and shift more of the cost of health care 

onto individual consumers through health savings plans. 

This budget devastates rural health care by zeroing out Rural Hospital Flex Grants 

and Rural Access to Emergency Devices, like defibrillators, and cuts state offices of rural 

health. Hospitals and patients in my rural district already face unique challenges, and this 

budget puts them at a disadvantage. Also worrisome are this budget’s dangerous health 
22

tax proposals, which will create greater obstacles to affordable health care for the elderly, 

people who are already sick, and low-income families. In addition, the President’s 

proposals to expand health savings accounts provide only meager hope, at best, to those 

of modest income. 

And, as you know, the recent budget reconciliation bill included over $50 billion in 

cuts to Medicare and Medicaid. Now, the President’s Budget seeks to continue down that 

dangerous path, threatening the wellbeing of the most vulnerable in our society by 

making $160 billion in new cuts to these programs. Unfortunately, this budget asks states 

to bear the brunt of these cuts while failing to take meaningful steps to control rising 

health care costs. 

I strongly oppose these cuts and am hopeful that the members of this committee can 

work together to protect these vital programs. 

Thank You. Mr. Secretary, I look forward to your testimony. 

THE PREPARED STATEMENT OF THE HON. HEATHER WILSON, A REPRESENTATIVE IN 

CONGRESS FROM THE STATE OF NEW MEXICO

Thank you, Mr. Chairman, for holding this hearing today to review the President’s 

Budget for health care. And thank you, Secretary Leavitt, for being here today. 

I am concerned about many areas in this budget, including Medicare, rural health 

programs, health professions programs, and the National Institutes of Health. But let me 

focus on two areas: Medicaid and the Indian Health Service. 

Last year Congress made changes in Medicaid that achieved about $7 billion in 

savings over five years, changes I did not support. Now the Administration proposes 

additional Medicaid changes yielding an addition $13.5 billion in savings over five years, 

without making substantial improvements in the program that would improve people’s 

health. Most of these savings would come from administrative changes in areas HHS 

may not have the authority to change. These changes include reductions in 

Disproportionate Share Hospital payments, rehabilitation services, and school-base health 

services: changes rejected by Congress last year. I am concerned of the impact these 

changes would have on providers and services to Medicaid beneficiaries. 

We must strengthen and improve Medicaid to make it a better program for lowincome children, pregnant women, disabled, and elderly Americans. These changes 

simply fall short and could actually harm access to health care for these populations. 

The administration has also chosen to eliminate the Urban Indian Health Program, 

an important program within HIS providing health care to Indian people living in urban 

areas. In Albuquerque, the Urban Indian Health Program provides $1.5 million annually 

in health care services to the 48,000 urban Indians living in the Albuquerque area. Two 

non-profit health organizations, First Nations Community Healthsource and the 

Albuquerque Indian Health Service Dental Clinic, receive grants from this program to 

provide services. 

We already have shortfalls within HIS, particularly for urban Indians. Only 1% of 

the $3.1 billion HIS budget is earmarked for urban Indian health, while 75% of Indians 

now live in urban areas. Now the Administration wants to take away that 1%. The 

Urban Indian Health Program is important for the health of urban Indians in Albuquerque 

and we must work to strengthen health care for Indians living in urban areas. 

Thank you, Mr. Chairman. 

 CHAIRMAN BARTON. Mr. Secretary, welcome to the committee. We 

look forward to hearing your testimony and then we are going to have 

some questions. We are going to recognize you for such time as you 
23

may consume. I am going to set the clock at 10 minutes but take as 

much time as you wish. Welcome to the committee. 

STATEMENT OF HONORABLE MICHAEL O. LEAVITT, 

SECRETARY, U.S. DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

 SECRETARY LEAVITT. Thank you, Mr. Chairman. 

 I have submitted a prepared opening statement. I will briefly 

summarize and then be eager to get directly to the questions of the 

members. 

 The budget that has been presented to you today is nearly $700 

billion. It is roughly broken into two categories; all of you are familiar 

with them. One is entitlement programs, that is to say decisions that we 

have made as a country to provide health care and other important human 

services to those in our Nation who are poor, elderly, or disabled. And 

then there is the discretionary budget. That would be a large group of 

programs that upon which you act each year. We will have an 

opportunity, I am sure, to talk about both. I will just comment briefly. 

 Particularly Medicare is of grave certain to me. It currently occupies 

nearly 3.4 percent of our gross domestic product. That is to say one 

program is 3.4 percent of every dollar that is generated in our economy 

and if it is allowed to continue to grow as it is, by 2040 it will be nearly 8 

percent of our entire gross domestic product. Again, unchanged by 2070, 

and it will be 14 percent of our gross domestic product. I do not think 

there is a person in this room who believes that that can continue as it is. 

We will not be competitive as a Nation. The jobs that are underlying our 

economy that ultimately generate the tax revenues that make possible for 

Medicare to be paid for and to be a commitment that we make as a 

Nation will disappear and the equation will no longer work. And I just 

want to acknowledge that. We will have some discussion about things 

that could be done in the near term and perhaps in the long-term but it is 

an important part of our conversation. 

 I suspect that much of our discussion today will center around the 

discretionary budget. If I may acknowledge that the budget that I am 

presenting here today is $1.5 billion less than the ‘06 budget. This is a 

period of deficit reduction. As many of you know, much of my public 

service was spent as a governor of one of our States. I was governor 

during the periods of time when we had tax revenues sufficient to expand 

programs. I was the governor during times when we had difficult 

periods where we had to reduce our expenditures so as to balance our 

budget. And while this is not a balanced budget, it is clearly consistent 

with the President’s proposal to reduce the deficit by half by 2009. In 
24

doing that, may I just acknowledge that whenever you are doing a budget 

and whenever you are reducing deficits you are faced with choices 

between very good options. Everything in this option is good because 

someone feels passionately about it and because it represents something 

that I feel confident and my heart responds to it in the same way yours 

does. There will be disagreement today with the decisions that we have 

made, I acknowledge that. 

 My purpose today is to simply outline for you the rationale that I 

used and that was used by the Administration to make these decisions. If 

you disagree, obviously that will now go into the legislative process and 

that opportunity will present itself. I think it might be valuable rather 

than try to enumerate each part of this very large and complex budget if I 

were to provide you with a sense of the philosophy that went behind it, 

the general guidance that I gave to those who prepared it under my 

direction. You will find, for example, in this budget though there are 

fewer dollars, you will find new initiatives. You will find initiatives, for 

example, on health information technology or what I refer to as critical 

path to personalized medicine. You will find new initiatives on 

providing our older Americans and disabled Americans with a choice to 

have health care in their homes and you will find new programs on 

HIV/AIDS. All of these are very important new programs. You will see 

a continued commitment on the part of the President on community 

health centers. You will find that we have represented new dollars here 

for bioterrorism and for pandemic flu and for certain high demand highly 

efficient programs that we felt simply needed to be nurtured even during 

the period of deficit reduction. We have chosen to fund those programs 

by looking for dollars within the budget that were one time dollars that 

may not have been repeated. We have looked for programs whose 

purposes might be found in multiple places and we have looked for ways 

to tidy that up and to put it under one program. You will see that we 

have used carryover funds in certain situations. You can in times like 

this sweep the corners and find ways in which to accomplish more with 

less. It is a time that drives efficiency. 

 I have also said to my colleagues there are a series of principles that I 

would like you to follow as you look at each program. It might be 

valuable for you to know what those principles are. I will likely through 

the course of our discussion today refer to those principles when I 

explain to you why I have made a reduction in a program that you might 

not agree with. For example, in many programs, I found that they tend to 

approach a problem in a very general way, whereas there is a specific 

part of the problem that we could target. In most cases, the principle is 

let us target the real problem, and while we might be brilliant at the 
25

general distribution of funds, let everyone get something, let us focus on 

the real problem and target funds. 

 The second principle is in working to prevent as opposed to simply 

pay for after people are sick or after some disruptive damage has been 

done. You will see an emphasis placed on prevention in this budget. 

You will also see me biasing my judgments toward the direct delivery of 

services. You will find places where there may have been a building 

program before that I have in this budget suggested we cannot afford this 

year, but I do not want to cut direct services and so we have not invested 

in infrastructure to the extent that it would have, in fact, compromised 

our ability to provide services to people. You will see a bias on my part 

with respect to programs that allow markets or individuals to make 

choices, whereas government often might make choices that were less 

specific to their needs. I believe that markets and individuals make 

choices that government-wide programs often do not and I think they are 

better choices. 

 You will see a substantial emphasis here to invest in new technology. 

We are going to talk, I think, later I am sure about some of the places that 

HHS funds research. Hard choices needed to be made there and I 

concluded that if a grant for example had run its course and if the 

research had been concluded, that rather than continue that grant, we 

ought to emphasize new investigators. We ought to find new 

technologies on which we are simply now just starting so you will see 

emphasis on investment there. 

 HHS is a very large department. I have 27 different operating 

divisions that report to the Secretary. It is large, as I said $700 billion. 

Many of those investments tend to be quite stove piped rather than look 

across the department where there is something happening in other 

operating divisions and they tend to see them as separate programs. I try 

to look across the department which means in some cases you may find a 

program that has been eliminated, but it may be quite well funded in 

another or it may be that by putting the program together in A and B we 

can create a better program. So you will see an approach that will be far 

more department wide as opposed to the stove pipe. 

 You will also see heavy emphasis on my part on accountability and 

being able to measure. In my judgment, if I cannot measure its benefit, 

there may be some measurement there but it T’s it up in my mind for 

very heavy scrutiny. And you will find places where there may have 

been good being done, but if I cannot measure it in a time of deficit 

reduction, I have just concluded that those were candidates for reduction. 

So you will see targeting--you will see prevention orientation, you will 

see direct services over infrastructure. And those are the kinds of 

principles that I used. 
26

 Mr. Chairman, that gives you a broad overview of the way I have 

approached this budget. Again, I want to acknowledge that this is a time 

for deficit reduction. There will be suggestions I have made that you will 

not like and I understand that. I am here to hear your thoughts and give 

you mine and the legislative process will then march forward. 

 Mr. Chairman? 

 [The prepared statement of Hon. Michael O. Leavitt follows:] 

PREPARED STATEMENT OF THE HON. MICHAEL O. LEAVITT, SECRETARY, U.S. DEPARTMENT 

OF HEALTH AND HUMAN SERVICES

 Good afternoon, Mr. Chairman, Representative Dingell, and Members of the 

Committee. I am honored to be here today to present to you the President’s FY 2007 

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

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

to make America healthier and safer. Today, we look forward to building on that record 

of achievement. For that is what budgets are — investments in the future. The President 

and I are setting out a hopeful agenda for the upcoming fiscal year, one that strengthens 

America against potential threats, heeds the call of compassion, follows wise fiscal 

stewardship and advances our Nation’s health. 

 In his January 31st State of the Union Address, the President stressed that keeping 

America competitive requires us to be good stewards of tax dollars. I believe that the 

President’s FY 2007 budget takes important strides forward on national priorities while 

keeping us on track to cut the deficit in half by 2009. It protects the health of 

Americans against the threats of both bioterrorism and a possible influenza pandemic; 

provides care for those most in need; protects life, family and human dignity; enhances 

the long-term health of our citizens; and improves the human condition around the world. 

I would like to quickly highlight some key points of this budget. 

 We are proposing new initiatives, such as expanded Health Information Technology 

and domestic HIV/AIDS testing and treatment that hold the promise for improving health 

care for all Americans. We are continuing funding for high-performing Presidential 

initiatives, including Health Centers, Access to Recovery, bioterrorism and pandemic 

influenza; and we are also maintaining effective programs such as Indian Health 

Services, Head Start, and NIH medical research. 

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

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

emergency — or something even worse. To this end, the President’s Budget calls for a 

four percent increase in bioterrorism spending in FY 2007. That will bring the total 

budget up to $4.4 billion, an increase of $178 million over last year’s level. 

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

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

National Stockpile; support a mass casualty care initiative; and promote the advanced 

development of biodefense countermeasures through NIH to a stage of development so 

they can be considered for procurement under Project BioShield. 

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

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

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

including providing pandemic influenza vaccine to every man, woman and child within 

six months of detection of sustained human-to-human transmission of a bird flu virus; 

ensuring access to enough antiviral treatment courses sufficient for 25 percent of the U.S. 
27

population; and enhancing Federal, state and local as well as international public health 

infrastructure and preparedness. 

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

ongoing pandemic influenza activities such as safeguarding the Nation’s food supply 

(FDA), global disease surveillance (CDC), and accelerating the development of vaccines, 

drugs and diagnostics (NIH). 

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

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

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

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

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

 Last July, the Administration emphasized five key principles for reauthorization of 

the Ryan White CARE Act: (1) serve the neediest first; (2) focus on life-saving and lifeextending services; (3) increase prevention efforts; (4) increase accountability; and (5) 

increase flexibility. The President has made fighting the spread of HIV/AIDS a top 

priority of his Administration, and he will continue to work with Congress to encourage 

prevention, and the provision of appropriate care and treatment to those suffering from 

the disease. The President’s FY2007 budget request for the CARE Act HIV/AIDS 

activities is $2.16 billion, an increase of $95 million for several elements of the new 

domestic HIV/AIDS initiative. The request will support a comprehensive approach to 

address the health needs of persons living with HIV/AIDS, consistent with the 

reauthorization principles. The budget also includes a new authority to increase program 

flexibility by allowing the Secretary to transfer up to five percent of funding provided for 

each Part of the Ryan White CARE Act to any other Part. 

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

includes important cross-cutting initiatives that will move us forward in our battle to treat 

and prevent disease – $49 million for the Genes, Environment and Health Initiative and 

$113 million for the Director’s Roadmap. In addition, it contains an additional $10 

million for the Food and Drug Administration to lead the way forward in the area of 

personalized medicine and improved drug safety. 

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

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

For instance, the President’s Budget calls for an increase of nearly $60 million in the 

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

development of electronic health records (to help meet President Bush’s goal for most 

Americans to have interoperable electronic health records by 2014); consumer 

empowerment; chronic care management; and Biosurveillance. 

 The Budget also includes several initiatives to protect life, family and human 

dignity. These include, for example, $100 million in competitive matching grants to 

States for family formation and healthy marriage activities in TANF. And it promotes 

independence and choice for individuals through vouchers that increase access to 

substance abuse treatment. 

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

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

passing the Deficit Reduction Act (DRA). DRA supports our commitment to sustainable 

growth rates in our important Medicare and Medicaid programs. It also strengthens the 

Child Support Enforcement program. 

 The Deficit Reduction Act also achieves the notable accomplishment of 

reauthorizing Temporary Assistance for Needy Families (TANF), which has operated 

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

 Medicaid has a compassionate goal to which we are committed. Part of our 

obligation to the beneficiaries of this program is ensuring it remains available well into 

the future to provide the high-quality care they deserve. Last year when I made my 
28

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

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

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

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

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

$1.5 billion over five years in Medicaid and S-CHIP and several administrative proposals 

saving $12.2 billion over five years. 

 This Administration has also pursued a steady course toward Medicare 

modernization. In just the past three years, we have brought Medicare into the 21st

century by adding a prescription drug benefit and offering beneficiaries more health plan 

choices. 

 Medicare’s new prescription drug benefit provides seniors and people with 

disabilities with comprehensive prescription drug coverage, the most significant 

improvement to senior health care in 40 years. Millions of seniors and people with 

disabilities are already using this benefit to save money, stay healthy, and gain peace of 

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

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

of stronger than expected competition in the prescription drug market. Moreover, 

beneficiary premiums are now expected to average $25 a month – down from the $37 

projected in last July’s budget estimates. The Federal government is now projected to 

spend about 20 percent less per person in 2006 and, over the next five years, payments 

are projected to be more than ten percent lower than first estimated. So taxpayers will 

see significant savings. And state contributions for a portion of Medicare drug costs for 

beneficiaries who are in both Medicaid and Medicare will be about 25 percent lower over 

the next decade. All these savings result from lower expected costs per beneficiary; 

projected enrollment in the drug benefit has not changed significantly. 

 President Bush proposes total outlays of nearly $700 billion for Health and Human 

Services. That is an increase of more than $58 billion from 2006, or more than 9.1 

percent. 

 While overall spending will increase, HHS will also make its contribution to 

keeping America competitive. To meet the President’s goal of cutting the deficit in half 

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

fiscal year. 

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

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

to different conclusions about which programs are essential and which ones are not. That 

has been true with every budget I’ve ever been involved with. It remains true today. 

There is a tendency to assume that any reduction reflects a lack of caring. But cutting a 

program does not imply an absence of compassion. When there are fewer resources 

available, someone has to decide that it is better to do one thing rather than another, or to 

put more resources toward one goal instead of another. 

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

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

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

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

Rural Health where we have proposed to reduce this program in the Health Resources 

and Services Administration, given that HHS administers 225 health and social services 

programs that provide resources to rural areas. In addition, the Medicare Modernization 

Act contained several provisions to support rural health, including increased spending in 

rural America by $25 billion over ten years. For example, it increases Medicare Critical 

Access Hospitals (CAH) payments to 101 percent of costs and broadens eligibility 

criteria for CAHs. Moreover, recognizing that Congress adopted many of our saving 

proposals last year, we are continuing to make performance-based reductions. 
29

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

held accountable for spending the taxpayers’ money more efficiently and effectively 

every year. To assist you, the Administration launched ExpectMore.gov, a website that 

provides candid information about programs that are successful and programs that fall 

short, and in both situations, what they are doing to improve their performance next year. 

I encourage the Members of this Committee and those interested in our programs to visit 

ExpectMore.gov, see how we are doing, and hold us accountable for improving. 

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

confident that we can continue to help Americans become healthier and more hopeful, 

live longer and better lives. Our FY 2007 budget is forward-looking and reflects that 

hopeful outlook. 

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

 CHAIRMAN BARTON. Okay, thank you, Mr. Secretary. 

 Let me reset the clock here quickly. The Chair recognizes himself 

for the first five minutes of questions. 

 The President’s Budget for the National Institute of Health is $28.6 

billion, which is basically a freeze over the fiscal year 2006. As you 

know, it is a high priority of mine to reauthorize the National Institutes of 

Health. It has not been reauthorized in 14 years. In reauthorization, we 

need to put some reforms in place to make the institutes more able to 

address the health care research needs for our country. What is your 

view of the need to reauthorize the programs at NIH? 

 SECRETARY LEAVITT. Mr. Chairman, we look forward to working 

with you on that matter. I would like to tell you that as that discussion 

begins, that my time as Secretary has provided me with some insights I 

think I would be interested to express. I mentioned the fact that across 

HHS is a lot of stove piping. We do not often look at programs in the 

context of the larger purpose. And that is true in a lot of Government 

agencies and a lot of Governments. It is in part true at NIH. You will 

see in this budget an emphasis on what I refer to in the budget as transinstitute initiatives. There are certain initiatives that will help every one 

of the institutes. For example, an important part of our effort this year is 

a human genome and environment study. Nearly all of the disease 

specific institutes have at their heart or the heart of their new science is 

the human genome and how we can connect what is going on in the 

environment with genetics. That is something that will benefit every one 

of the centers or institutes. You will also see what we refer to as road 

map. Again it is emphasizing the need for science to be looked at on a 

multi-jurisdictional way. Medicine in the future needs to be more 

personalized, it needs to be more predictive, it needs to be more 

preemptive so that we are emphasizing prevention. And as we begin that 

discussion, I would like to suggest that those are important 

considerations. 

 CHAIRMAN BARTON. Okay. In the budget reconciliation package 

that the President signed last week, we found savings to offset the 
30

proposed, I think it is 4.4 or 4.7 percent cut in physician reimbursement. 

That was a one year fix. So we held our physicians harmless for a year 

but under the current physician reimbursement formula, every year that 

we do not reform the program for determining how to reimburse our 

physicians, it reports these cuts and these cuts are cumulative. What 

steps do you feel the President and yourself can make to work with this 

committee to reform the reimbursement scheme for our physicians so 

that we get something that is fair to them and fair to the taxpayers that 

accurately reflects the cost of the physician to providing health care 

services for our Medicare beneficiaries? 

 SECRETARY LEAVITT. Mr. Chairman, this is a perplexing difficult 

problem and it is one that is a collision that is going to occur every year 

until we come up with a new way of approaching this. And in my 

judgment, the best way is for us to begin to assign a value on 

performance and not simply quantity. We need to be focusing on pay for 

performance where we are rewarding physicians in a way that 

acknowledges the value they bring. What we have seen over time often 

is that when rates are cut, the quantity of procedures increases. And that 

is not going where we want it to go. Where we want it to go is for us to 

have lower costs, fewer medical mistakes, and we want there to be higher 

quality. A key to that is having health information technology that 

allows us to measure when quality is occurring. You will see in this 

budget substantial emphasis on health information technology. Several 

of the members mentioned health information technology in their 

opening statements. That in my judgment is a critical element not only 

to reforming our payment structure but in reaching better quality as well. 

 CHAIRMAN BARTON. Well, are you willing to work with the 

committee and make it a priority to engage stakeholders, before the 

Congress adjourns, to try to come up with a new system? 

 SECRETARY LEAVITT. Mr. Chairman, yes, in fact, we have a number 

of pilots already that we are working to develop experience in this area. 

And we think it is crucial that we find new ways of solving this problem. 

This will be a perennial collision until we are done. 

 CHAIRMAN BARTON. All right, I agree with that. 

 With that, I recognize the Ranking Member, Mr. Dingell for five 

minutes. 

 MR. DINGELL. Mr. Chairman. 

 Again, welcome, Mr. Secretary. In December Chairman Barton 

wrote you forwarding several follow up questions of mine. In 

December, I along with Mr. Stupak, Mr. Brown, and Mr. Waxman sent 

you a letter with many key questions about the catastrophic healthcare 

crisis in the New Orleans region. Finally, several Democratic Members 

and I wrote you after last year’s budgetary hearing asking follow-up 
31

questions which were forwarded to you by Chairman Barton. When will 

you answer these letters, Mr. Secretary? 

 SECRETARY LEAVITT. Mr. Dingell, I had hoped I would have that 

letter when I came today. I feel like a student who forgot his homework. 

 MR. DINGELL. Three, Mr. Secretary, not one, three. 

 SECRETARY LEAVITT. Well those letters need to be thoughtfully 

considered and within a day or two you will have an answer. I would 

like to tell you that that is an area that I do see tremendous opportunity. 

Mr. Stupak mentioned it in his opening statement. I have been in New 

Orleans a number of times. I am going again next week. I do believe 

that there is an opportunity to replace what was a clearly dysfunctional-- 

 MR. DINGELL. Mr. Secretary, I just want the letter. I have got other 

questions I want to ask-- 

 SECRETARY LEAVITT. --talk about the letters. 

 MR. DINGELL. Mr. Secretary, we are sad. We feel that you are 

disregarding your friends up here on the Hill since you were not being 

responsive. This is not the kind of person I thought you are. Maybe it is 

indifference. It is even possible, although unlikely, that it is arrogance. 

When are we going to get a response to these letters? 

 SECRETARY LEAVITT. That is, Mr. Dingell, not something I would 

want to be tagged with. I think that is a letter I need to personally deliver 

to you very soon. 

 MR. DINGELL. Well I look forward to receiving it. I hope that we 

are both alive and in good health when it comes. 

 Mr. Secretary, yesterday the New York Times featured a story by 

Robert Pear detailing private insurance plans, under Part D, that had been 

using a variety of tools that are designed to make it harder for seniors to 

get their drugs though the plan claims they are covered. Mr. Secretary, 

one of the tools that the plans are using is called prior authorization 

which requires seniors to get approval from the plan before they can get 

their medicine. This is a trick that has been used throughout the years to 

prevent people from getting adequate and proper care that the plan 

should provide and that their doctor thinks they happen to need. There 

are a number of priority drugs that should be covered at least the cost to 

one beneficiary on a plan’s formula that are still subject to prior 

authorization. 

 Mr. Secretary, there are a number of drugs that are on the second 

level of plan formularies that are subject to prior authorization. There 

are a number of prior authorization forms in total all across the plans. 

Mr. Pear, in this article had, in just one plan, 39 prior authorization forms 

alone. Given that there are some 40 to 50 stand-alone drug plans in each 

area, that amount could be significant and it could be an unreasonable 

amount of paperwork for everybody concerned. Now this plan referred 
32

to with 39 prior authorization requirements when it was approved to sell 

coverage under Part D. Mr. Secretary, what are you going do about this? 

You have a mess on your hands. You have a plan that will not work. 

What are you going to do? 

 SECRETARY LEAVITT. Mr. Dingell, for the others who may not be as 

familiar with this, we have like any other plan there is a formulary for 

every plan. And if-- 

 MR. DINGELL. And some people are getting in the plan because the 

drug is on the formulary and then they find out all of a sudden it ain’t. 

 SECRETARY LEAVITT. And I identified precisely the same problem 

that you have spoken to and I have-- 

 MR. DINGELL. What are you going to do about it? 

 SECRETARY LEAVITT. Well I am going to do something about it. In 

fact-- 

 MR. DINGELL. Well I hope you and I are both alive and in good 

health when this occurs. 

 SECRETARY LEAVITT. Well I hope you are still alive by the 30th of 

March because that is when I intend to have this problem solved. I have 

told my colleagues at CMS and I have met with the insurance plans and 

we are working toward a standardization of that process. It is 

unacceptable in my judgment as well to have that many forms-- 

 MR. DINGELL. Mr. Secretary, you have got thousands of people that 

are walking away, that stand in line for a long time, without a plan. They 

do not get their drugs filled. They are charged more than the plan is 

supposed to charge. The dentists or the doctors or the pharmacists do not 

know what the plan is or whether these people are covered and they are 

sent off. You got people who have heart conditions or other serious 

conditions that cannot get their pharmaceuticals because the situation 

isn’t working. What are you going to do about that? 

 SECRETARY LEAVITT. Actually, Mr. Dingell, millions of people are 

having their prescriptions filled every day. 

 MR. DINGELL. And millions are not. 

 SECRETARY LEAVITT. I do not know in the millions there may be-- 

 MR. DINGELL. The thousands, hundreds of thousands. 

 SECRETARY LEAVITT. No, there is not even that. The system is 

working better every single day. We have worked 46 days under this 

implementation. We have 250,000 people a day who are enrolling. This 

system is working. By the end of this year, we are going to have 28 to 

30 million people who are participating and... 

 CHAIRMAN BARTON. Two hundred and fifty thousand a week, not a 

day. 

 SECRETARY LEAVITT. That is what I meant to say, millions of 

people-- 
33

 MR. DINGELL. I hope, Mr. Secretary you are back here because I do 

not think you are going to be singing the same song next year. 

 Mr. Chairman, thank you. 

 CHAIRMAN BARTON. Thank you. 

 MR. DINGELL. Mr. Secretary, thank you. 

 SECRETARY LEAVITT. Thank you. 

 CHAIRMAN BARTON. Mr. Hall of Texas. 

 MR. HALL. Mr. Secretary, the Chairman interrupted me before I was 

through reading to you a while ago. I want to get back to the ovarian 

cancer problem. You know, within the budget it would seem that 

ovarian cancer research was lagging behind. We passed a resolution to 

the House last year that pointed out while other cancer deaths had 

declined, the same cannot be said of ovarian cancer. And there was a cut 

in the ovarian cancer research. I just want to ask you what is to be done 

for the decrease for this disease and how does the Administration 

propose to advance survivability rates of this and other diseases with the 

current rate of funding, particularly for ovarian cancer. Can you take a 

good hard look at that? 

 SECRETARY LEAVITT. Mr. Hall, I would be very pleased to do that. 

 MR. HALL. That is all I ask you to do, be responsive on today. 

Thank you and I yield back. 

 SECRETARY LEAVITT. Thank you. 

 CHAIRMAN BARTON. Is Mr. Waxman ready? 

 MR. WAXMAN. Why don’t you call Mr. Pallone and I will have a 

couple minutes to-- 

 CHAIRMAN BARTON. All right, Mr. Pallone? 

 MR. PALLONE. Thank you, Mr. Chairman. 

 Mr. Secretary, I have to say that the system is definitely not working 

in my State of New Jersey and we continue to experience significant 

problems with implementation of the new Medicare prescription drug 

benefit. It continues to take--I mean, basically the State is continuing to 

pay the drug bills of many low income people who have fallen through 

the cracks of the new program. To date, New Jersey has paid $113 

million in claims for its dual eligibles and State pharmacy assistance 

programs or i.e. PAAD as we call it or approximately $2.6 million a day. 

Now despite the incentives from Medicare and Medicaid’s efforts to 

reimburse States, it remains unclear whether New Jersey will be fully 

repaid under the waiver program designed by CMS. Under the program, 

CMS will not reimburse New Jersey for its expenditures on behalf of 

125,000 Medicare beneficiaries enrolled in the pharmaceutical assistance 

program or those who are eligible for the Part D low income subsidy. 

The waiver strictly applies to those low income seniors who are duly 

eligible for Medicare and Medicaid. 
34

 And a large part of the problem, Mr. Secretary, is that CMS has yet 

to confirm to New Jersey which of the 190,000 PAAD beneficiaries are 

eligible to the low income subsidy. Presently, only 4,467 PAAD 

members were automatically deemed eligible for a Part D low income 

subsidy while CMS’s record shows 26,676 have enrolled in the slim D or 

qualified individual programs. Slim D or qualified individual status 

should have automatically deemed all 26,767 as eligible for Part D low 

income subsidy in my opinion. 

 Also, New Jersey has yet to confirm which PAAD beneficiaries were 

successfully enrolled in the Part D plan. There is a lot of misinformation 

regarding the enrollment of these beneficiaries into Part D plan. The 

State currently has no way of knowing how much was supposed to be 

covered by either one, the Part D prescription drug plan, two, the 

beneficiary I call sharing, or three, the State through wrap around 

coverage. So New Jersey in my opinion should not be penalized for 

providing coverage in light of this missing information. CMS should 

reimburse the State for part of the cost that was supposed to be paid for 

by the TDP just like it is doing for dual eligibles who have their costs 

covered by the State. I understand that you had ongoing discussions with 

Governor Corzine about this issue but I do not think have come to any 

resolution. You can tell me differently. I have a letter here I would like 

to give to you if I could, Mr. Chairman from both of our Senators-- 

 CHAIRMAN BARTON. Without objection. 

 [Insert Letter] 
35
36

 MR. PALLONE. It is our entire New Jersey Congressional Delegation 

and it asks you to revise the waiver program to provide reimbursement 

for all State pharmacy assistance program claims that should have been 

covered by Medicare Part D and this press is also made the waiver 

application which they submitted to CMS. I have two questions. First, 

can you tell me to what extent the Administration will reimburse New 

Jersey and other States for these costs and why the Bush Administration 

has resisted reimbursing States for covering SPAP claims in the first 

place. It seems logical to me to the extent that Medicare was responsible 

for covering a portion of these claims, the State should be reimbursed for 

it. So would you agree with that or, you know, if you could answer, that 

is my first question. 
37

 SECRETARY LEAVITT. Congressman, as you have indicated I have 

been in on-going discussions with Governor Corzine. I spoke with him 

last night as late as 9:30 and we have 50 different States that we are 

working with. I will suggest to you that we have struggled to get New 

Jersey working well for reasons that are not as clear to me nor them, but 

we are working on it. And the important thing is that no one is going 

without their prescription drugs. They are getting their drugs when they 

go to the counter and we will continue to do that so long as we need to, 

to make sure that that happens. Let me be responsive to your specific 

question. We are prepared under this demonstration waiver to assure that 

New Jersey is reimbursed for anything that a plan would have paid for 

either a participant in the program or a participant who should have been 

enrolled in this system that was not identified because of the system 

problem. They are getting their prescription drugs, New Jersey will be 

reimbursed. Now New Jersey and a number of other States have State 

prescription drug benefits that are paid for by State dollars at their 

choice. We will not be reimbursing them for moneys that would have 

been paid under a State program unless they would have been eligible for 

Medicare Part B. We do not have legal authority to do that and it would 

not seem fair. We honor the fact that New Jersey and a number of other 

States have chosen to pay for parts of prescription drugs that the Federal 

program does not and that continues to be their obligation and their 

payment requirement. 

 MR. PALLONE. I have a second question in the letter, Mr. Chairman. 

I do not know--let me say the letter requested the Administration extend 

the waiver program’s end date, which as you know, is today because the 

State continues to experience significant problems with implementing the 

new program and the large amount of information that is still missing, it 

is highly unlikely that all the problems will be fixed today. So New 

Jersey would be forced to either continue to pay for the cost of drugs 

which should have been covered on Medicare Part D or let people go 

without their medications. And obviously that latter is not an option. So 

Mr. Secretary, you realize that the problem still exists, what steps are you 

taking to extend the waiver program and reimburse States for the cost 

that they incur beyond today? 

 SECRETARY LEAVITT. It is our judgment that under the waiver that 

New Jersey has signed we can take care of their reimbursement needs 

and continue to work with them. I think New Jersey will be reimbursed 

in the way that you have outlined. 

 CHAIRMAN BARTON. The gentleman’s time has expired. 

 MR. PALLONE. Okay. I will submit this, Mr. Chairman. 

 Thank you, Mr. Secretary. 

 SECRETARY LEAVITT. Thank you. 
38

 CHAIRMAN BARTON. The gentleman from Florida, Mr. Bilirakis. 

 MR. BILIRAKIS. Thank you, Mr. Chairman. 

 Mr. Secretary, back in the mid-60’s when Medicare was devised and 

admittedly it was a plan that was submitted by the other party, certainly 

Congressman Dingell’s father was a major part of that procedure with 

nine of us often times and had a lot of problems. I do not know the date 

on the floor of this Part D of Medicare--we lose an awful lot of the 

clippings from the newspapers regarding these problems. And I dare say 

that if those who oppose that program and if the media, particularly the 

editorial letters who may or may not have opposed that program, if they 

had basically slandered it because of the problems, the complexities, and 

that not, we probably would not have Medicaid today. And what is 

happening with this Part D. So let me ask you, will every Medicare 

beneficiary who wishes to enroll in the Part D plan be able to do so by 

the May 15 deadline? 

 SECRETARY LEAVITT. I will resolve this to make certain everyone 

has an opportunity. It is a voluntary program. We have 90 days longer. 

We are hopeful that Members of Congress will join with us in helping 

people enroll. We are enrolling about 250,000 a week-- 

 MR. BILIRAKIS. You said 90 days longer-- 

 SECRETARY LEAVITT. No, no, we have roughly 90 days left between 

now and the 15th of May. 

 MR. BILIRAKIS. Okay. 

 SECRETARY LEAVITT. We feel quite optimistic that it can be done. 

If the Congress chooses to extend the period that will be a policy 

decision that you will make. 

 MR. BILIRAKIS. Yeah, if it turns out as a result of information 

available to all of us--you and to the Congress--that there are people out 

there who have not really decided yet who probably will want to and 

whatnot, would you oppose extending the deadline? 

 SECRETARY LEAVITT. Well, we will make known to you at the time 

any ramifications such a policy change would make. At this point, we 

are moving with the assumption that it would be May 15. We think we 

can accomplish the task period, but at the end of that time if you choose 

to do so, then obviously we will follow along and do our best to make 

certain that people are enrolled. 

 MR. BILIRAKIS. And I realize that we should not even be talking 

about doing so this early in the game obviously. But the point of the 

matter is that we want to make sure that everybody has that opportunity 

and so, HHS would be unbiased and honest in terms of telling us or 

sharing with us if there are people out there that probably would need 

more time. Is that right? 
39

 SECRETARY LEAVITT. Mr. Bilirakis, our shared goal, I think 

everyone in this room is to make certain people have prescription drugs. 

For the first time in our Nation’s history a senior should not have to 

worry about having their prescription drug costs wipe out their savings. 

We are working very hard to make certain people have opportunities to 

purchase a plan and we hope we can all work together in whatever way is 

necessary to accomplish that task. 

 MR. BILIRAKIS. So regarding the budget, NIH budget is at last 

year’s level, the National Cancer Institute will be reduced by $40 million 

this year. Comments? 

 SECRETARY LEAVITT. Well, we are spending $4.8 billion a year on 

cancer research, that is up substantially from earlier in 2001 and the 

whole NIH has been doubled since 1998. We are committed to 

continuing to make progress on cancer and believe we can. Earlier I 

mentioned the fact that much of our new investment at NIH is in the area 

of genetics and the environment. We are also working with what I call 

the critical path project which is to dramatically cut in the amount of 

time it takes to have a drug that comes from research able to go from 

bench to bedside. We are working to make it more personalized, more 

preventative, and more preemptive. All of those are new objectives of 

NIH and we are targeting the money in that way. Would it be nice if we 

were able to dramatically increase the spending in NIH, yes. And do we 

think in future years that will be possible, I do. But this year, we are 

doing deficit reduction. We have been able to keep it flat and that was 

the judgment we made. 

 MR. BILIRAKIS. So were the National NCI people, the National 

Cancer Institute people coordinated with before you decided to reduce 

the project by $40 million? 

 SECRETARY LEAVITT. Well we have had extensive conversations 

with the community. Obviously no one is enthusiastic about not having 

a big increase. 

 MR. BILIRAKIS. Yes. 

 SECRETARY LEAVITT. And we hope in time that our continued 

investment will be possible. Right now we are reducing deficits and 

being able to keep it flat was something that was very important to me 

and in the sense of being able to not see substantial cuts, $40 million is a 

lot of money in specific terms but in the context of a $30 billion budget 

at NIH it is relatively-- 

 MR. BILIRAKIS. Many of us are concerned about that and we thank 

you, Mr. Chairman. 

 MR. DEAL. [Presiding] Mr. Waxman? 

 MR. WAXMAN. Thank you, Mr. Chairman. 
40

 Mr. Secretary, just to follow up on Mr. Bilirakis’ question, you hope 

to put more money into NIH but now we are doing deficit reduction. 

The President said he is going to halve the deficit by 2012. Many of us 

doubt that is going to be possible. Should we look to 2012 to find more 

money into the research of NIH and NCI? 

 SECRETARY LEAVITT. The good news is, Mr. Waxman, we do our 

budgets one year at a time. 

 MR. WAXMAN. Well especially when you cut back on some of this 

research we do not just lose one year but we lose a lot of research and 

hope for the future. 

 Now I want to get back the Medicare drug proposal because I think 

the rollout has been an absolute disaster. People were turned away 

without their drugs. Pharmacies could not determine a person’s 

eligibility. Sometimes they waited for hours on the phone just to try to 

get through to the plans. People were charged too much. Many 

vulnerable Medicaid beneficiaries including people in nursing homes 

were assigned a plan randomly and then it turned out to be inappropriate. 

Some of these things are implementation problems and they will get 

worked out as time goes by but some of them are really based on the 

flawed concepts of the bill. There have been a lot of legislative 

proposals out there designed to address some of the most immediate 

problems. I would like us to have a fundamental fix where we have a 

drug benefit as part of Medicare itself. But since we are not going to get 

to that, the budget that is submitted to us has no legislative proposals to 

remedy any of the problems which have become so obvious. Is it your 

position that this program is working just fine? Do you take the position 

that no legislative fixes are necessary to address the problems we are 

already facing and the ones that we will obviously see on May 15 if we 

do not change the deadline and remove the penalty? 

 SECRETARY LEAVITT. Mr. Waxman, we are 46 days into its 

implementation, the biggest change in Medicare’s history. No logical 

person would see a transition that complex and that large happening 

without some unexpected problems and we have had them. We make no 

excuses. The measure of our success is not what it looks like after 46 

days it is what is going to look like when it is fully operational. 

 MR. WAXMAN. You do not see any legislative changes now? 

 SECRETARY LEAVITT. I do not see any change that I cannot do 

regulatorily right now. Now I will tell you that we are already beginning 

to look at what I refer to as a Part B 2.0 that is the next plan year. And I 

think you will see substantial changes evolving because the market is 

evolving. The market has driven the cost down from about $37 a month 

to $25. 
41

 MR. WAXMAN. Mr. Secretary, I appreciate your conclusion and I 

gather that is the statement of the Administration that they are asking for 

legislation. If you decide to, we are here and we certainly want this drug 

system to work. And I want to give you an example of a problem that 

we had come up a number of times especially at a briefing that I had 

recently. You have people on Medicaid who are also on Medicare, they 

are called dual eligibles. And they had a program under Medicaid where 

they were provided drugs. It was a stable system, they knew what was 

covered and their drugs were going to be covered. Now they are shifted 

over to Medicare. Yet on Medicaid there was a limit on what the drug 

companies could charge. It was the best price because of the rebates the 

companies had to provide. Well now that they are under Medicare there 

are no rebates. There are no limits. And it seems to me that what we 

have had because of this shift is a multi-billion dollar increase in the 

money that the drug company is going to make. Dr. Steven Shandomyer 

of the University of Minnesota estimated the drug prices for these dual 

eligible beneficiaries are now 20 to 30 percent higher than when they 

were on the Medicaid. So it seems to me that we are talking about a 

windfall some say as much as $30 billion for drug manufacturers all at 

the taxpayer’s expense. Can you explain the rational of this to me? It 

makes no sense for the Federal Government to be paying millions of 

dollars more for drugs they were getting at a discount price prior to 

January. What is your response to that? 

 SECRETARY LEAVITT. Well the prices for pharmaceuticals are going 

down, not up and this program is representing a substantial savings for 

every senior who enrolls. This is a good deal for seniors. I mentioned to 

you-- 

 MR. WAXMAN. Well not for dual eligibles. They are getting less of 

a benefit and it is going to cost the taxpayers more money. 

 SECRETARY LEAVITT. I would disagree with that assumption. 

 MR. WAXMAN. Well, I am going to take it then that you disagree 

with me and I would like you to look at it more carefully. 

 The last point I want to raise in the few seconds I have left is that 

generic drugs play an important role in lowering the prices and yet we 

have seen a drastic increase for generic drug applications. At the same 

time there has been a dramatic decrease in the number of people at the 

FDA to process these drugs and there is a 16 month time lag to review 

generic applications and then the budget does not call for an increase in 

the amount of money for FDA to ever meet its performance standards. 

Do you think that there is any way we can get an increase in the number 

of staff to address this backlog or are we going to find ourselves falling 

further and further behind in getting generic drugs approved? 
42

 SECRETARY LEAVITT. Mr. Waxman, we are in agreement actually as 

you know with the need for us to continue to enhance the approval of 

generics. We have, in fact, made substantial increases in years past in 

our staff and we have been able to increase dramatically the number of 

approvals. We do have a backlog. They tend to be a backlog of 

applications that are on medications that there is already one, two, or 

three in that category and we are anxious to get to as many different 

categories as we can at one time. We share your goal of having more 

generics. We think it is an important part of the reason the prescription 

drugs costs are coming down. 

 MR. WAXMAN. So you are prioritizing generics based on the 

categories? 

 SECRETARY LEAVITT. We want to make sure we have generics in 

every category. If we have one that is--I am told that if we have one 

which there is already three in a category, we are better off approving 

one or two that we do not have, where we do not have approvals than just 

having a fourth or a fifth added. 

 MR. DEAL. The gentleman’s time has expired. 

 Mr. Upton? 

 MR. UPTON. Mr. Chairman. Again, welcome, Mr. Secretary and I 

just want to thank you from what I heard from a number of different 

answers particularly the answer to Chairman Barton because I too hear a 

lot from my providers. My hospitals, my nursing homes, equipment 

suppliers, and others all are concerned about the across the board cuts in 

inflation updates. That is usually what they talked about. And I think 

having a new system put into place where you are looking at a number of 

different pilot programs would solve some perennial problems that need 

to be resolved. I look forward to working with you to see that that can 

happen in a constructive way. 

 I want to follow-up just briefly on a question that Mr. Bilirakis 

asked. He asked specifically about perhaps extending the deadline from 

May 15 for folks to sign up for Part D. You answered it well. But the 

question that I have is what about the idea, whereas plans can change as 

they provide the medications to the beneficiaries but, in fact, the 

beneficiary is not able to change from one plan to the other. Michigan 

has, I think, 42 different plans now and someone’s own medication may 

change, the plan may change, and as I understand it, they are locked in 

for a year. Is that right, into that plan, prescription--more that you are 

having so many enrollees sign up virtually every week, hundreds of 

thousands, millions across the country. What would be the problem with 

allowing folks as plans change, they can change their plan for the 

beneficiary, what would be wrong with allowing the beneficiary to 

change the plan maybe a limit per year or something along that line so 
43

that they can make better accommodations for their own personal needs? 

Would the Administration have any objection to that if we were able to 

pursue something like that? 

 SECRETARY LEAVITT. Mr. Upton, there are very good reasons that I 

will enumerate in a moment why it is valuable to have the capacity for a 

plan to change their formulary, many of which could endure to the 

benefit of a beneficiary. It is important to acknowledge that this problem 

is talked a lot about. People worry that a plan could try to change their 

formulary. In order to do that, they have to go through an extensive 

process that includes the approval of HHS. Now granted we are only 46 

days into this but we have had exactly zero applications to change 

formularies and put another way this is a problem people are concerned 

about but it is not happening. On the other hand, there are good reasons. 

If there are, let us just assume that a generic drug was approved or one 

was clearly it was a drug safety problem. A formulary needs to be 

changeable with the process in order to protect the beneficiary as well as 

to provide equity for the plan. They cannot do it without approval. They 

have to get HHS approval. In order to have approval, they have to go 

through an extensive process including an independent panel, 

demonstrating that it is in the interest of the beneficiary. So this is just 

one of those problems where people worry about it and I understand that, 

but it is just not happening and therefore, I believe it is overstated as a 

challenge. 

 MR. UPTON. Well that is good, thank you. 

 As I mentioned in my opening statement, I talked a little bit about 

health information technology and I am very supportive of the budget 

you have presented in that regard. I also chair the technology 

subcommittee. Are there any statutory changes that we should be taking 

a look at to make sure that these budget increases can be accommodated? 

 SECRETARY LEAVITT. We are proceeding in the absence of Health 

IT bill that is currently being discussed, to develop standards. If your 

question is are there things that could help us in that process 

legislatively, the answer is yes. But we are making good progress. We 

will see by the end of this year substantial deliveries or deliverables in 

important areas that will drive this forward. 

 MR. UPTON. Well I look forward to working with you and your 

department. I appreciate your being here this afternoon and I yield back 

the balance of my time. Thank you. 

 SECRETARY LEAVITT. Thank you. 

 MR. DEAL. The Chairman yields back. 

 Mr. Rush is recognized for five minutes. 

 MR. RUSH. Thank you, Mr. Chairman. 
44

 Mr. Secretary and I have got three questions I want to get to rather 

quickly. My question number one is would you be in favor giving all the 

angst and confusion around signing up for the Medicare Part D, would 

you be a supporter of extending the deadline from May 16 to another 

date, May 15 to another date? 

 SECRETARY LEAVITT. As we have spoken earlier, we are seeing 

enrollment of more than 250,000 a week. We have 90 days left. We 

believe that we can accomplish this task. If in fact Congress chooses to 

extend it, obviously we will continue to enroll people. That is a policy 

decision that will need to be made by the Congress. I will say that 

people need deadlines. If we did it indefinitely, people will not feel the 

need to investigate this. Now that is a decision or a judgment that the 

Congress will need to make. I believe by the time we have reached the 

period of enrollment, we will have reached our goal of 28 to 30 million 

in the first year. This is not an easy population to find at time and I am 

sure there will be ongoing enrollment that will be valuable. 

 MR. RUSH. Well, in light of that, can you or your office provide 

some members of this committee on a district by district basis how many 

eligible people have already signed up for Medicare Part B? 

 SECRETARY LEAVITT. Yes, I expect that we will deliver that 

information to you, each of the Members of the Congress some time next 

week. It will not only demonstrate how many are eligible but it will also 

show how many have actually enrolled. 

 MR. RUSH. Okay. 

 SECRETARY LEAVITT. And I hope that information will be of value. 

 MR. RUSH. Thank you. In your opening statement, you said that 

you had put an emphasis on prevention in this budget and I appreciate 

that emphasis and I share your belief that this is cost effective in the long 

run. But giving this emphasis on prevention, can you explain why does 

the budget, your budget eliminate or make steep cuts in prevention 

programs such as the Universal Need and Learn Program, the 

Preventative Health Services block grant, the Community Services block 

grant, even the Health Professionals Training Program or scholarships 

for disadvantaged students? Can you explain to me why those cuts here 

are those preventative in nature? 

 SECRETARY LEAVITT. Earlier I reflected the fact that during my 

period as governor I became quite conscious of the fact that any time you 

are dealing with reducing budgets you are dealing with a conflict 

between the good programs. And there are many of those programs that 

I understand their purpose and I understand why people feel passionately 

about them. I laid out a series of investment principles that talked about 

things like whether we are targeting our investments or whether we are 

going after prevention. And without responding to all of those, I will tell 
45

you that the reasons that I did it would have been embodied in those 

principles, one that you mentioned that would I think bare reflecting on. 

Also as governor, I came to understand the value of having the block 

grants that the social services or the community services block grants. 

At various times during my time as governor I wrote to Congress to 

advocate for them. So I find myself as Secretary now on the other side 

of the table. Well the governors like those and they like those because 

they are very flexible and you can put the money where you need it. 

Frankly during many of the years when most budgets went up, it was 

times in which the States were having very difficult times financially. 

But the States are doing better right now and we are cutting deficits and I 

made a decision that during this period I could not measure the impact 

they were having. The States are in better shape financially than we 

were and I made a decision to make that as one of my cuts. Now you 

may disagree with that judgment but that is the basis on which I made 

my decision. 

 MR. RUSH. So you still characterize this budget as being a propreventative in nature? 

 SECRETARY LEAVITT. Oh, absolutely. I have made investments that 

have focus on these programs and many of the cuts that you reflect some 

of them are not in my judgment oriented to prevention. In some cases, 

they are oriented toward covering a large general population but were not 

targeted, were not preventative, and I made those judgments. 

 MR. RUSH. I applaud your increase in the dollars allocated for 

community based health clinics. Can you explain to me what is your 

vision in regards to community based health clinics? I understand that 

you are proposing at least 80 new community based health clinics? 

 SECRETARY LEAVITT. We actually--and I share the President’s 

vision here. I want to see community health centers expanded, 1,200 of 

them. In fact, this budget has enough for 302 centers to either expand or 

to start new ones, 80 of them will be in low income or in specifically 

targeted low income counties. I see this as a way in which we can 

provide access to the basic health care to literally millions of people and 

for that reason we have that is a good example of the targeted program, 

one that clearly gives people a medical home in which they have 

prevention. That is a good example of the kind of decision I made based 

on those principles. 

 MR. RUSH. Mr. Chairman, I yield back the five minutes of my time. 

 MR. DEAL. The gentleman yields back. 

 Mr. Secretary, my turn now I suppose. I have a couple of questions. 

First of all, we have heard references made on both sides to situation in 

the Katrina aftermath and I would like for you to comment generally on 

where you think we are in terms of compensating those pharmacists and 
46

other providers who feel that they have been left out in the process and 

does this budget include specific dollars to address that problem and if 

not what kind of information can you give us with regard to resolving 

that question? 

 SECRETARY LEAVITT. The issues related to Katrina were in large 

measure dealt with in our Deficit Reduction Act where as much as $2 

billion was allocated for us to deal with uncompensated care and in some 

cases to use whatever was left over to help rebuild the health 

infrastructure. Comments have been made already about the need to do 

that. I will not repeat those except to say that we see a grand 

opportunity. The health care system there frankly did not function very 

well before. Now we see an opportunity to develop an extraordinary 

health care system that will show the way for many others in the future. 

 MR. DEAL. So those funds in the Deficit Reduction Act would be 

more than adequate to cover the claims for care that some might claim 

are still uncompensated? 

 SECRETARY LEAVITT. We believe they are. 

 MR. DEAL. All right, thank you. 

 As you know, this committee has held two hearings on the issue of 

our preparedness for a potential pandemic influenza outbreak and I want 

to thank you again for testifying at our hearing we had back in 

November. And I know that you have been working closely on the 

implementation of the plan itself. We appropriated money during the last 

steps for the beginning of that process and I believe there is money in 

this proposed budget for additional funding to go forward with a further 

preparedness plan. Would you sort of outline for us what you think the 

steps we need to be taking during this next year are and how the funds 

that you are requesting would implement those steps? 

 SECRETARY LEAVITT. As you are aware, the President requested a 

$7.1 billion emergency supplemental. The Congress funded $3.3 billion 

of that in the course of the last deliberations. Those dollars are being 

used for a combination of different efforts. One would be State and local 

preparedness. I am in the middle of--I am not in the middle I am at the 

beginning of 50 State summits. I have been to ten and we have 36 of 

them either held or being planned but we will have 50 State summits 

where we are rallying local communities, business organizations, 

community groups, churches, schools, colleges, to prepare and $350 

million will be used for that. A large measure of it will be used for 

international and domestic monitoring so that we are able to bulk up the 

capacity we have to gather information about when the disease strikes 

and how broad it is. We are also purchasing antivirals. We will reach by 

the end of 2006 our targeted 20 million courses in stockpiles and we are 

developing jointly with the State’s distribution needs. We are also on the 
47

well advanced stages of developing new technology, cell based 

technology for vaccines and additional capacity to manufacture it. As to 

the next phase, it is basically a continuation of what we are now doing. 

We are in the process of doing RFPs, we have done one RFP for 

different manufacturers to help us build capacity and new technology. 

What we have now will get us through the first phase of that but we are 

confident there will be promising technologies that we will need to 

nurture through it. So this gets us into the game but we are clearly going 

to need the help of Congress and being able to fulfill that plan and be 

able to complete our preparation. I will say, Mr. Chairman, that when it 

comes to a pandemic we are overdue and we are under prepared and 

there is a lot of work going on right now but we have still, we are still a 

long ways from the point of being able to rest with the assurance that we 

are ready. 

 MR. DEAL. Am I correct, though, that there would be other funds 

under the Public Health Security Act that could also be used for some of 

these purposes that you have outlined? 

 SECRETARY LEAVITT. Well we clearly recognize that every part of 

our public health infrastructure needs to be tuned in a way that it will 

meet multiple demands. And so we are working to create a sense of 

synergy on what we are doing here with what we are doing in the other 

areas of concern such as bioterrorism or any natural disaster. We are not 

just using these pandemic funds for pandemic. We are generally 

expanding the preparation that is available to Americans for all natural 

disasters or all disasters rather they are manmade or natural. 

 MR. DEAL. Now in conclusion as one who has just toured the new 

facilities of the CDC in our State, I was very impressed with the 

improvements and the technology that is going to go forward in their 

future efforts there. 

 Mr. Engel, you are recognized for five minutes. 

 MR. ENGEL. Yes, thank you, Mr. Chairman and thank you, Mr. 

Secretary. It is not easy obviously testifying before the committee and I 

want to just again reiterate my disappointment in a lot of the things that 

my colleagues have mentioned about the budget but I welcome you. 

 I want to first talk to you about a letter that I sent along with every 

colleague in New York, Democrat and Republican, all 29 of us signed a 

letter to you last October expressing our concerns about the Ryan White 

Care Act and funding concerns. We--it is four months later and we have 

not received a response to that letter. I would say respectfully that since 

every New Yorker again, Democrat and Republican, signed onto the 

letter, I think that four months is really too long to wait for a reply and I 

would hope that we could at least get an answer to some of our questions 

as soon as possible. 
48

 As you know, no State spends more than New York to care for its 

residents with HIV and AIDS, over $3 billion last year. Unfortunately 

one of the epicenters of the AIDS crisis in the United States is in New 

York and we have always viewed this funding as a partnership between 

State, cities, and the Federal Government. And we rose to the occasion 

bringing the financial resources to finance HIV services long before the 

Federal Government committed substantial resources for HIV. We are 

concerned because we think that the intent of the funding and the way it 

is going to be done sort of borrowing from Peter to pay Paul and we feel 

that reducing the Ryan White resources that State’s use to care for people 

with HIV and AIDS punishes those States that have been forthcoming in 

terms of money and we think that is really the wrong way to go. People 

living with AIDS and HIV is increasing, and the demand for the Care 

Act services there is no justification we feel to hurt New York because 

we have done the right thing. And would it not make more sense to the 

Federal Government to prioritize significant new dollars for HIV/AIDS 

care rather than pitting regions against each other in the fight for dollars. 

I do not want to go into everything. I do not have the time that we said 

in our letter, but it was a very well written thoughtful letter and I think 

again the fact that 100 percent of the New York delegation, you know, it 

is hard to get 29 members to agree on anything, but we agreed on this 

and I would just appreciate, and I say this not to embarrass you because I 

know you are obviously working as hard as you can but we would like an 

answer to our letter and I would like you to comment on some of the 

questions that I raised. 

 SECRETARY LEAVITT. Thank you, Congressman. I am disappointed 

that your letter has not been responded to and I will find out why that is. 

 MR. ENGEL. Thank you. 

 SECRETARY LEAVITT. I would like to make clear that we are 

supportive of the reauthorization of the Ryan White Care Act. As you 

are probably aware, we have laid out a series of principles that we think 

improve our capacity to respond and we want to serve the neediest first. 

We want to focus on the lifesaving and life extending services. We are 

interested in increasing our prevention efforts going again back to 

prevention. In keeping with that, I would like to add that in this budget 

we are proposing a substantial new initiative that the President has 

announced that will test an additional 3 million Americans and will take 

as many as 4,400 people off a State waiting list. We see that as a 

significant new investment in this area, particularly during a time when 

we are working so hard to reduce deficits. I mentioned it early today as 

one of the new initiatives that we have worked hard to find other ways 

and places where we could reduce them in order to fund that. And so I 

wanted to mention that given the fact that I am sure there are a lot of 
49

programs that people are unhappy about. I wanted to make sure I got a 

chance to mention this one and I am sure would be favored to you. 

 MR. ENGEL. I would like to thank you. I have obviously some more 

questions which I will submit but they are all stated in the letter. 

 I want to talk to you about SAMHSA. There is a SAMHSA funded 

Substance Abuse Prevention Program run by Bronx Aid Services. They 

came to visit my office in Washington, D.C. Kids in the Bronx which I 

represent have the highest rate of substance abuse in New York City and 

the program works to increase self esteem, counseling, and opportunities 

for these kids. There are huge cuts to SAMHSA’s budget and many 

programs are receiving cuts or flat funding this year and again I want to 

just express my dismay at getting such large cuts to SAMHSA of this 

treatment opportunities for substance abuse and mental health is so 

devastating and I am wondering if you could comment on that. 

 MR. DEAL. This will have to be the gentleman’s last question. 

 SECRETARY LEAVITT. I will just acknowledge that we are focusing 

our efforts on the transformation of the SAMHSA which will allow us to 

deliver better with the dollars we are investing and I am quite 

enthusiastic about this transformation effort and recognizing the limits of 

time obviously with that. 

 MR. ENGEL. All right, thank you, I just wanted to point and I have 

no other questions but there is a $71 million dollar cut so we think that is 

overboard. 

 Thank you, Mr. Chairman. 

 MR. DEAL. The gentleman from Kentucky, Mr. Whitfield. 

 MR. WHITFIELD. Mr. Chairman, thank you very much and Mr. 

Secretary thank you for joining us today. We all appreciate the great job 

you are doing a very difficult position. 

 But first I want to mention a couple of things to you. The first thing 

I want to mention to you is that we have heard a lot of discussion about 

budget reductions and loss of funds. And the first thing that I want to 

talk to you about is an offer that we made to give you money and you all 

did not take it. And I want to point out specifically what I am talking 

about. Appropriators back in 2001, without any authorization from any 

authorizing committee, particularly this one that has exclusive 

jurisdiction on the issue relating to prescription drug monitoring 

programs, started funding unauthorized programs and over the last three 

years have received something like $33 million. This committee 

unanimously passed a National Drug Monitoring Bill that was passed on 

the House floor. It was passed in the Senate by overwhelming majority. 

The President signed it in August. We sent letters to OMB to Josh 

Bolton and said because this is a new program at HHS and we work 

closely with HHS staff and even prior to your assuming the 
50

responsibilities of Secretary, we worked with Secretary Thompson who 

was very supportive of it and we were shocked really that there was zero 

dollars in authorized program under HHS to implement this new program 

and there was $10 million over Department of Justice for the old 

unauthorized program. And I would just like to urge you to work with us 

in trying to correct that error and get it over at HHS where we think it 

belongs, and after many hearings on the subject, we found some flaws in 

the DHA Program and I would ask you would you be willing to work 

with us to get additional money for this program? 

 SECRETARY LEAVITT. Mr. Whitfield, I am aware of this. And I am 

most aware of it because we like the program. I am also conscious of the 

fact that there is this ongoing discussion as to whether or not it ought to 

be in the Justice Department or at HHS, and the Chairman has made very 

clear to me where he thinks my allegiances ought to be and we just need 

to work out among the various committees how best to fund this. We 

like it, we will be cooperative, we will do all we can. We need your help 

as well on-- 

 MR. WHITFIELD. Well when you are saying an ongoing discussion, 

who are you referring to? 

 SECRETARY LEAVITT. Well I recognize there is a little bit of a 

jurisdictional discussion going on between the committees of Congress 

and also we are very anxious to see the program succeed. 

 MR. WHITFIELD. Yes. You know our view on this is the 

appropriators never had it authorized, not all of us are shocked that 

appropriators would do something like that, but this is the committee 

with jurisdiction and we did it overwhelmingly, passed it unanimously, 

and I know that you are supporting us so hopefully the Chairman and the 

rest of us can let our leadership know that we feel very strongly that the 

money should be at HHS and not DOJ so thank you for that. 

 The second issue I would like to raise, and I am not the only member 

of Congress that has been focused on this issue, there are also a number 

of Senators as well and we have had discussions with Dr. McClellan and 

that relates to the calculation of the average sales price for prescription 

medicines under Part B of Medicare used by oncologists and whether or 

not service to these should be included in that calculation. And in the 

letter that Dr. McClellan wrote to some groups, he made it very clear that 

it was the position of CMS that these service fees, if they are valid 

service fees, should not be a part of the calculation of average sales price. 

But that has never really been placed into a regulation at HHS or CMS 

and I was just curious do you have any thoughts on that particular 

matter? 

 SECRETARY LEAVITT. Your recounting of the history of this is 

consistent with my own understanding. It is also my understanding that 
51

the regulations are under consideration currently and that we are working 

through that. I think Dr. McClellan has stated the department’s policies 

clearly as I could. 

 MR. WHITFIELD. Well I hope that they will take some action on it. 

They have been working on it for some time and I do think it would 

clarify and even help alleviate a number of problems and any influence 

that you might have over there if you agree with us we would appreciate 

it. 

 SECRETARY LEAVITT. Thank you. Well I do not know if I have 

influence there, I will test it out. 

 MR. DEAL. Thank you. And Mr. Whitfield I am going to weigh in 

on that, too. We passed a good bill and they are our friends on 

appropriations. They need to understand that once we have done it, that 

we expect them to receive the wishes of the authorized program. I will 

be working with you, Mr. Lewis, Mr. Rogers, and the ranking members 

of the minority side to make that happen. 

 MR. WHITFIELD. Thank you, Mr. Chairman. 

 MR. DEAL. Mr. Markey? 

 MR. MARKEY. Thank you, Mr. Secretary very much for coming here 

today. 

 You have got a very tough job. Donald Rumsfeld says to the 

President, I need a massive increase in defense spending, he gets it. 

Secretary of Treasury says to the President I need a massive cut in taxes, 

he gets it. In line comes health care, you are next, you get to deal with 

what is left over and as a result you have to make cuts and you have to 

make tough decisions because it is not given in this Administration the 

same priority that I am sure you would give it. 

 So we have a situation here where you were talking about what 

happens if there is, if it is unchecked what happens to the Medicare 

budget. What happens to the Medicaid budget in terms of the percentage 

of gross domestic product that it will consume in the years ahead. What 

is happening in this budget though, Mr. Secretary, is a cut once again in 

the NIH research budget including inflation. And there has been a 9 

percent cut in the purchasing power of NIH over the last three years that 

is a reduction. Now I was born in the same month as President Bush and 

President Clinton and we are the first baby boomers. And there is going 

to be millions and millions coming every year after us and the estimate is 

that 16 million of us will have Alzheimer’s, 16 million of us. Now it 

seems to me that the best cost containment we can have is if we invest 

the extra few billions now to find a cure to work on prevention rather 

than what is estimated to be a $100 billion a year bill for our baby 

boomers with Alzheimer’s in nursing homes under Medicaid in a 

relatively short number of years. This year it is $20 billion for Medicaid 
52

for Alzheimer’s patients. At that time, all the baby boomers are in 

today’s dollars. In other words, 20 percent of today’s defense budget 

would go just to one disease, Alzheimer’s and Medicaid much less all the 

other costs related to Alzheimer’s. So Mr. Secretary, do you not think it 

makes sense for us to increase NIH research, to increase the likelihood 

we find the cure, that we find a preventative way of avoiding the trillions 

of dollars which are going to have to be spent just on the treatment and 

care for Americans, baby boomers who have Alzheimer’s. That would 

be one disease would be $150 billion a year every single year, trillions of 

dollars. Would it not make sense for us to make that investment today 

with additional research and the same way that the preceding generations 

had 36 years of unchecked increase in NIH research for heart disease and 

stroke and for cancer that has actually made it likely that the average 

baby boomer sitting here if they are healthy today will live to 85 to 90. 

In other words, the cost for Alzheimer’s is going to be explosive because 

of the success of the preceding generations of research. So can you 

explain to me how the White House can give you a budget but kind of 

forces you to cut NIH research when I know you know that the best thing 

you could do is to engage in that research in that prevention to avoid the 

long-term costs which are hundreds of times higher than any budget 

saving this year or next year or the year after. 

 SECRETARY LEAVITT. Mr. Markey, you pointed out the fact that 

Medicare and Medicaid make up a huge portion of our entire national 

budget. We often refer to bills as cuts in the proposals we have made but 

the reality is we will see dramatic increases both as a percentage and in 

real dollars in that area. And the point you have made is that many of 

those expenses will be driven by demographics that are very clearly in 

front of us and that if we can find ways of preventing those illnesses that 

it will ultimately create somewhere to our benefit. That is a strategy that 

makes sense. It is a strategy that we have followed. It is a strategy that I 

suspect over time we will continue to follow. This is a year which we 

are doing deficit reduction and we have worked hard and fought hard to 

be able to protect the integrity of the funding of NIH that we have-- 

 MR. MARKEY. Well wouldn’t you prefer honestly to have to have $5 

billion less in tax breaks for the upper 2 percentile and $5 billion more in 

research for Alzheimer’s and Parkinson’s and these other diseases that 

are going to hit just about every family in America in terms of changing 

and altering the whole history of those families. Wouldn’t it be better 

now to rather than those tax cuts to invest in that research and that 

prevention because of the payoff we know will come because we have 

seen it in health, in heart disease, we have seen it in cancer. Wouldn’t it 

be better for this generation to make that same investment and to not 

have those tax cuts? 
53

 SECRETARY LEAVITT. What I feel very good about is that we are 

targeting our investments of NIH in a way that will go across not just 

Alzheimer’s but across all disease categories. That we are going to be 

able to begin to explore the value of the human genome and the 

environment which I believe will in fact have a substantial impact on the 

demographics you have spoken of. It is a new way of investing our 

dollars and we are deploring in the context of our critical path initiative, 

our road map initiative, and other efforts to make certain that we are 

focusing on the-- 

 MR. MARKEY. I know what you are saying, Mr. Secretary, but after 

36 years of NIH budget increases, we now have a 9 percent cut in 

purchasing power over a three year period. It cannot have anything other 

than a negative long-term impact on the likelihood that we are going to 

find a cure for Alzheimer’s and Parkinson’s which tragically will 

probably affect unfortunately about, you know, a third of the people who 

are sitting up here today. And I just think that in the long run whatever 

tax cuts, you know, the White House, President Bush, and Vice President 

Cheney might want to give to wealthy people has to be dwarfed by the 

epidemic, I mean literally an epidemic which is going to hit America in 

Alzheimer’s and Parkinson’s. 

 SECRETARY LEAVITT. But it is important to remember we are still 

investing $645 million a year. It is not as though we are terminating our 

investment, $645 million a year is not chump change, it is a big 

investment and one that-- 

 MR. MARKEY. But you are cutting the National Institutes of Aging 

the baby boomers retiring-- 

 MR. DEAL. The gentleman’s time has expired. 

 The gentleman from Georgia, Mr. Norwood. 

 MR. NORWOOD. Thank you very much, Mr. Chairman and 

Governor, thank you so much for being with us. 

 Let me just ask a quick question. I know you have only been here a 

year and I bet you have figured out already that in this town everything is 

measured by how much you spend and if you do not spend more things 

are going bad rather than measuring things by what the results are. We 

are trying to get to that but most people still believe if you do not add 

more money every year then you are really not doing things. Now the 

comment was made there would be 9 percent cut. Is that correct? 

 SECRETARY LEAVITT. We will continue to see dramatic increases in 

investment in all those categories. What we are talking about is allowing 

programs to grow more slowly. 

 MR. NORWOOD. To my knowledge, we have doubled NIH in the last 

10 years, doubled. And all we are really saying as I understand it is okay 

one year in order to try to get all this spending under control they are just 
54

simply not going to get an increase. I hardly think that is the end of the 

world. Certainly they ought to be able to manage it so it is not the end of 

the world. If they cannot, they need to change the focus at NIH. 

 SECRETARY LEAVITT. I have learned over time, I have been through 

a number of budget years where things were not as good as others. I 

have learned over time that it is during these periods where we find new 

ways and improved ways to invest and I think what I pointed out earlier 

where we are beginning to invest in trans-institute initiatives that benefit 

every disease category. It did not take me a full year to figure out that at 

NIH there are 27 institutes-- 

 MR. NORWOOD. Right. 

 SECRETARY LEAVITT. --all of which are devoted to some kind of 

disease or a major component of health. Every one of them has things in 

common and if we are investing generally in the basic science of genes 

and the environment and other things it helps us. 

 MR. NORWOOD. I have three questions and I will probably never get 

to them but I will try. One of the things that has concerned me in the 

budget is that we ignore the fact that our physicians treating Medicare 

patients are going to get a cut of 4.6 percent and that means we will have 

to fix it because that is not just a reasonable thing to do. And then we 

also ignore the fact that MedPAC has recommended the 2.8 percent 

increase, which I happen to think MedPAC is a pretty darn good outfit. 

Now my understanding is, my feeling I guess I should say is, that at least 

CMS thinks we are going to solve all this problem by going to pay for 

performance and I am just not so sure we are going to solve all these 

problems. I understand the goal of pay for performance and I understand 

there can be some good things that come out of that, but a lot of the 

legislation that we are hearing about or listening to does not talk 

necessarily about quality of care but it talks about efficiency. And I am 

concerned that if we write that language wrong, we are going to be 

actually rewarding our physicians for providing the cheapest care and not 

necessarily the best care. Now I do not believe, and you can correct me, 

but I do not believe you would think that physicians ought to be 

rewarded for providing cheap care unless there are strong measures at 

CMS that show that they are also providing quality care. In other words, 

it needs to be quality care for less money for this to work. And if your 

crew has any suggestions about legislative language that can assure 

efficiency measures that are going to be created out of this, I really 

would appreciate it. And I have listened to Dr. McClellan for hours on 

end. We have talked about this and the potential unattended 

consequences there I think are very, very high, and if we are going to 

wait to get to pay for performance before we ever solve the physician 

payment formula, we are going to face this every year. Why don’t we 
55

face up to the fact that we are losing docs now because of payment in 

Medicare and let us give a modest increase as NIH keeps talking about 

wanting and everybody else wants Federal employees wants, give them a 

modest increase so we can work this out. 

 Next question, I just need to go on. What are you going to do, what 

is HHS going to do with at least the insurance plans in Part B that are 

engaging in inappropriate conduct? And since we have no patient 

protections, I am fairly certain we can count on that and that is going to 

affect the pharmacists as it today affects the dentists and the physicians. 

And I just hope you guys are going to be ready to get in there and fight 

for them. 

 SECRETARY LEAVITT. The plans need to keep their commitments 

and if they do not, we have regulatory authority and we will use it. One 

example of that, plans are required to have a 24 hour response. There 

needs to be an adequate or rather let me restate that. They have a 

requirement to have a 1-800 response. We are now inventorying to find 

if they all do. If they do not, you can count on the fact that I am going to 

use the regulatory authority given to me in the law to assure that they 

start. 

 MR. NORWOOD. Well they are already out there telling dual eligibles 

oh no, you are not a dual eligible you need to sign up for this plan. They 

are doing that now. And in conclusion, I think you are doing a great job 

with this. We are 44 days out. Pharmacists of course are upset and 

confused and got a cash flow problem. But to a man when I talk to them 

or a woman, they tell me this is going to get better. We think in time this 

is going to get better and this is going to work itself out. I think it is, too. 

 MR. DEAL. The gentleman’s time has expired. We appreciate the 

comments. 

 Mr. Green of Texas. 

 MR. GREEN. Thank you, Mr. Chairman. 

 And again, thank the patience of the Secretary. We only have these 

opportunities maybe a couple times a year so thank you for listening. 

 Mr. Secretary, we all know that the President, you and the President 

share commitment with members on both sides of the aisle for a 

community health center program. I have a health center in my district, 

Pasadena Health Centers, one of the 88 HRSA’s that announced that it 

received new access points beginning last December 1. And I 

understand the funding date was pushed back because Congress did not 

finish the work on appropriations until late December and yet to date this 

money has not been approved and appropriated and has not gone out the 

door. Community health centers like Pasadena operate on a very slim 

margin. They provide terrific care and are uninsured in our communities 

and they count on this grant funding to sustain their operations. I know 
56

you and Dr. Duke at HRSA are committed to delivering the funding so 

can you give us a date certain when the centers may receive this grant 

funding and more importantly when this money is delivered will it be 

retroactive to December 1? 

 SECRETARY LEAVITT. When I was in Houston and you mentioned 

on Labor Day we talked a little bit about community health centers and 

the mayor, actually Mayor White at that point indicated the impact that 

the evacuees were having on your city. 

 MR. GREEN. In fact, you actually backdated for those five new 

centers in our area. 

 SECRETARY LEAVITT. Are you talking about those funds or are we 

talking about the funds after that point? 

 MR. GREEN. No, we are talking about the new center funds that they 

were supposed to receive December 1 for that designation. 

 SECRETARY LEAVITT. I do not know the answer to this. I am going 

to have to get back to you. 

 MR. GREEN. Okay, if you could because I know that center happens 

to be in my district and we have four other ones and I am sure the rest of 

them around the country are calling their Members of Congress saying 

well when are we going to see the money now that it is February 1. And 

again, that was Congress’s fault because we did not do it until the 

reconciliation or they passed the budget. 

 The next question and again I want to thank you for your response to 

Hurricane Katrina at least in my area. Many health care providers 

stepped in and took care of the evacuees without regard to their ability to 

pay. And when the City of Houston called to let us know that hurricane 

survivors were having significant problems accessing their prescription 

drugs, our office received an immediate response from a lot of the large 

pharmacies, the chain pharmacies. In fact, it took action within hours to 

form an agreement with the State to get evacuees the prescriptions they 

needed. And I know you were at the Reliant Park and also at George R. 

Brown. I know the First Lady was there and saw these pharmacies that 

were set up literally within hours. Despite the creation of an 

uncompensated care pool in the Texas Medicare Labor, these pharmacies 

have still not been reimbursed for the prescriptions provided to evacuees. 

And to make matters worse, the Texas Medicaid Program has informed 

the pharmacies that CMS headquarters directed them to require patient’s 

original zip code for reimbursement information, and that is extremely 

difficult to obtain retroactively, particularly four months later and given 

the mobility of the evacuee population. Was it true that CMS directed 

State Medicaid programs require this information to the collection which 

is overly burdensome in my view, and can you clarify whether the 

pharmacies should seek reimbursements from Medicaid or FEMA as it 
57

seems these providers have consistently received conflicting information. 

Again, these are the ones set up under the emergency situation with 

200,000 people coming in. 

 SECRETARY LEAVITT. Congress was responsive to our request to 

provide funds and we have, there is not an unlimited number of funds 

that were provided and we want to make sure that we are using them to 

compensate the right people. We want to make sure we do not get to a 

situation where because of poor record keeping we are paying people for 

things they did not provide. And so I suspect that people at CMS have 

created criteria to try to make certain we are doing the right things with 

taxpayer dollars. If it has become more onerous than it need be then 

perhaps we need to take a look at it and I would be happy to ask CMS to 

do that. I am not aware of those requirements and this is the first I have 

heard of it. 

 MR. GREEN. Then I will probably just follow up with a letter 

because the pharmacies actually provided it at those shelters and again 

they took the information that they knew they could get at that time, but 

the pharmacies are the ones who were not receiving reimbursement. The 

prescriptions were filled on an emergency basis because people showed 

up without their prescriptions, without anything, but they did go through 

the system out there at the Reliant Stadium and all positions that were 

literally from all over and they took down their information and so they 

were able to fill pharmaceuticals for them but I will get a letter to you-- 

 SECRETARY LEAVITT. Thank you. 

 MR. GREEN. --on that so we can do that. 

 The last question I have in the 18 seconds is the elimination of health 

professions grants. It has become clear that in the past decades we have 

problem with capacity for providers of primary health care, and at the 

same time the budget seeks to stand HHS programs that direct, in direct 

care service is given budget cuts in health profession programs, how can 

the agency plan, enable, and secure a primary health care workforce? 

And again, we are looking at the health care centers that we are creating 

all over the country, community health centers, and is there something 

we can make sure that the personnel are there for our community 

centers? 

 Thank you, Mr. Chairman. 

 MR. BILIRAKIS. [Presiding] I thank the gentleman. 

 The gentlelady from New Mexico, Mrs. Wilson to inquire. 

 MRS. WILSON. Mr. Chairman, I came in late. I think there were 

some other members who-- 

 MR. BILIRAKIS. Well I have been asked to go right on down the line 

so I am just following orders. 

 MRS. WILSON. Thank you, Mr. Chairman, I appreciate that. 
58

 Mr. Secretary, thank you for being here today. I have gone through 

the budget and there are a number of things, I think that are going to be 

issues of continuing concern and discussion, but one of them I wondered 

if you could talk about a little bit is the union Indian program. There is a 

set aside that urban Indian health program in the past of 32 million that I 

think has been eliminated in this budget proposal. And 75 percent of 

Indians live in urban areas and that is only a 1 percent set aside in the 

Indian health budget which is now being eliminated. And I wondered if 

you could talk about how folks who do not live near the reservation are 

going to get their health care. 

 SECRETARY LEAVITT. I can. This is a good example of a situation I 

found where we are funding in one side of HHS community health 

centers and in another operating division in HHS the Indian Health 

Service we were providing urban clinics for Native Americans. And so I 

am just asked a question and I think it is the right response. Why are we 

creating separate facilities in the same department to serve essentially 

some of the same population. And so what I have proposed is to 

combine those in a sense so that we are serving those populations 

through our community health centers. Rather than have two less than 

ideally developed facilities, why don’t we have one extraordinarily good 

one and that is the strategy here. 

 MRS. WILSON. What does that mean for a member of the Navajo 

Nation who is living in Albuquerque, New Mexico and for the service 

where they get it, how they are enrolled, whether there are co pays and so 

forth, how is this transition going to take place? 

 SECRETARY LEAVITT. We need to reach out to them and make 

certain that they know that health care is available to them and make 

certain it is extraordinarily good health care and that it is a both 

welcoming environment and in quality. At least by my assessment it 

does not make any sense for us to be funding two facilities and 

sometimes in the same town and some cases serving very similar 

populations when we could have one significantly better facility if they 

were combining forces. And I recognize that there are perhaps cultural 

reasons that they have chosen to be served there but I do not think we are 

doing that entire population any favors by dividing our capacity to 

provide care. And so we are obviously going to have to change a pattern 

there but it will not only be more efficient but I think they can get better 

health care. 

 MRS. WILSON. Have the tribes been involved in the planning that 

has gone into this budget recommendation? 

 SECRETARY LEAVITT. There has been a lot of discussion about this 

through the Indian Health Service. Now, you know, can I testify today 

that all of them are crazy about the idea, probably not because people 
59

like to have their own facilities. It will undoubtedly affect a community 

of health care providers in a way but this is efficient. It is a good use of 

taxpayer funds. And frankly, it is a better way to serve people because 

we are going to provide them with I think superior health care and better 

facilities because we are combining them. 

 MRS. WILSON. And in Albuquerque we have multiple community 

health centers and we have the Albuquerque Indian Hospital and Clinic 

right next to UNM. I know that this is--have you worked through, is 

your intention to close the Indian Health Centers or is your intention to 

expand the community health centers to cover the existing infrastructure 

for the ISS? 

 SECRETARY LEAVITT. I hesitate to make a blanket statement on that 

matter because I am guessing there will be situations where both will be 

true. There will be places where we might be advised to close one. I 

suspect there is or there will be. But again the purpose here is to serve 

people better and to not duplicate services. I think this is a very good use 

of taxpayer funds and it looks after the way we can best serve people. 

 MRS. WILSON. I am asked to stay engaged with you on this as this 

develops because if it is news to me, I am betting that it is news to many 

of the Governors and pueblos who I represent and there are 48,000 urban 

Indians in Albuquerque who have had continual problems with the 

decline in funding in the Indian Health Service. And we cannot just say 

well this it the way we are going to do it and not plan it. 

 SECRETARY LEAVITT. A budget is a proposal for discussion and 

obviously we will begin that conversation. The extent of which has 

happened in Albuquerque I cannot attest to that. I can tell you we have 

some of the most compassionate people on the planet in the Indian 

Health Service who want very much to serve the population. 

 MRS. WILSON. Thank you, Mr. Chairman. 

 MR. BILIRAKIS. Mr. Stupak? 

 MR. STUPAK. Thank you, Mr. Chairman. 

 Mr. Secretary, if I may, let me ask you a few questions about 

Accutane and then I want to ask you a little bit Hurricane Katrina again 

back in the Gulf Region. Last Friday, Mr. Secretary, the FDA Advisory 

Committee met for the second time in two years to discuss the safety of 

Accutane. The Advisory Committee was updated on a new pregnancy 

risk management program called ipledge. While I am pleased to see 

some progress that has been made to better protect the public from the 

risk of pregnancy from Accutane, I have some concerns about the 

ipledge that I expressed in written comments to the Advisory Committee. 

For instance, I am concerned that the implementation of the program has 

been delayed and the Academy of Dermatologists has called for another 

delay. The FDA said at the Advisory Committee’s hearing after the 
60

Advisory Committee hearing that it would not delay the implementation. 

Can you reaffirm that it will not be delayed? 

 SECRETARY LEAVITT. On August the 12th of 2005, FDA approved 

new labeling for Accutane and included a strengthened risk management 

program. The sponsors agreed to implement the risk management 

program that requires registration in the program of wholesalers and 

prescribers and pharmacies and patients who agreed to specific 

responsibilities designated to minimize pregnancy exposures in order to 

distribute and to prescribe and dispense them. I am not sure, I am not 

familiar enough directly with this to give you the assurance you seek and 

maybe those who can and I think this is likely something I need to get 

back to you on. 

 MR. STUPAK. Okay, if you would. Also I have given you a slide 

there and also a sort of like a little outline of things that have happened 

since February 1, 2001, and it ends at November 21, 2002. And I am 

pretty concerned that the FDA is failing to protect the American public 

from the psychiatric effects of this drug. The FDA put a new advisory 

on their website last May after reviewing a study by Dr. Bremner of 

Emory University. In fact, that is the study I just handed you. If you 

take a look at the study, it says in the website the FDA says the FDA 

continues to assess reports of suicide or suicide attempts. All patients 

should be observed carefully. Patients should stop use if the patient has 

any of the symptoms. But the Bremner study here shows us there is a 21 

percent decrease of brain metabolism in the area of the brain that 

mediates depression and in the study by Mr. Bremner 50 percent of the 

subjects experienced headaches which were associated with the decrease 

in brain function. So you have over 160,000 people taking Accutane and 

of that 160,000 if half of them are having these headaches as the 

Bremner study shows, that is 80,000 people who could be experiencing 

the lack of brain metabolism of this drug. So my question to you is this. 

The FDA has received reports of 282 suicides since as of December 31, 

27 suicides alone last year, and according to the FDA that only 

represents two or up to as much as 10 percent of the real number that is 

out there. 

 So my question, Mr. Secretary with all these web updates, which 

studies, research, tracking and information sharing is going on between 

the FDA and National Institutes of Health to ensure that teenagers and 

their families are being protected from this drug other than just posting 

something on a website. 

 SECRETARY LEAVITT. Mr. Stupak, that seems like a very good 

question. It is not one I am technically capable of answering today. 

 MR. STUPAK. If I may, Mr. Chairman, I will put those in the record. 

Could you respond back in writing to the committee then? 
61

 SECRETARY LEAVITT. I would. And speaking of responding back in 

writing, earlier in your opening-- 

 MR. STUPAK. Right. 

 SECRETARY LEAVITT. You talked about the Katrina letter. 

 MR. STUPAK. December 15 letter. 

 SECRETARY LEAVITT. Yes, I spoke to Mr. Dingell and told him that 

we had hoped to deliver a response. I have the response now. I did not 

an hour ago. I will be delivering this in person to Mr. Dingell. I just 

want you to know about it and also Mr. Brown and it will be responsive. 

 MR. BILIRAKIS. Without objection that will be made a part of the 

record. 

 [The information follows:] 
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 MR. STUPAK. And without objection can that slide and document I 

submitted to him be-- 
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 MR. BILIRAKIS. Got it. 

 [The information follows:] 

 MR. STUPAK. Thank you, Mr. Chairman. 

 Getting back to Katrina and I appreciate the letter a few months ago. 

We appreciate it. Again, yesterday the Government Reform or I should 

say Mr. Davis released a report: A Failure of Initiative. And as I said in 

my opening comments that it seems like now in New Orleans it is 

business as usual. And when I read this report of Mr. Davis he said 

passivity did the most damage. The failure of initiative costs lives, 

prolonged suffering, and left all Americans justifiably concerned our 

Government is no better prepared to protect its people than it was before 

9/11 even if we are. So when I asked you earlier that I would hope that 

you would become more aggressive in the health care in New Orleans, 

we were down there for three days and they have not been reimbursed 

since August. Big Charity has not been reimbursed since August 29 

when the hurricane hit through January and there are some questions 

like, “well they have not submitted proper documentation.” But if you 

do not have power, no computers, you are delivering care, everybody 

agrees they are delivering care, they have to be reimbursed. We have to 
73

cut through the red tape and get these folks some money if they are ever 

going to provide health care material. My time is up already. The point 

is this is being done to expedite and provide health care down there. 

 MR. BILIRAKIS. Brief response, please. 

 SECRETARY LEAVITT. We do not lack aggressiveness on this. I will 

be down there again on Tuesday. I was there just a couple of weeks ago. 

I think it was one of the great opportunities to demonstrate not just a 

renewed health care system but an exemplary health care system. And I 

could act philosophic on it but the time is up and I think in the letter you 

will see our vision is real and our commitment is too. 

 MR. STUPAK. And more than vision we need health care. What 

about them there? Their vision may be great but how do you implement 

vision if no one is implementing that on the ground? 

 SECRETARY LEAVITT. I think what you will find is that much of the 

health care that is there is being provided by HHS and you saw 

uniformed people running all over New Orleans that were providing it. 

 MR. BILIRAKIS. Mr. Fossella may inquire. 

 MR. FOSSELLA. Thank you, Mr. Chairman, thank you, Mr. Secretary 

for your patience and the job you do, appreciate it and appreciate you 

being here today. 

 The first question deals with Ryan White funding and I am going to 

follow up a little bit to Mr. Engel’s question before but a little more 

specific. I guess one of the President’s principles calls for the creation, 

the severity of need for core services index to be used and the revision of 

Title 1 and Title 2 funding formulas. The index as I understand it to 

include among other measures the availability of other resources 

including local, State, and private resources. It is my understanding that 

HRSA has formed advisory panels to help the development of such an 

index and the panels have discussed including an end adjustment that 

factors available resources in State’s capacities to pay for services. New 

York City is in New York State and has stepped up to the plate when it 

comes to administering the Ryan White from the dedication of 

significant resources. Such an index includes an adjustment for available 

resources. I guess the question we have then does this create a 

disincentive for jurisdictions like New York and will HHS if they have 

express that they will not--they have in the past, I believe pursued 

policies with inherent disincentives. So are we with this new sort of 

proposal creating a disincentive for cities or States like New York? 

 SECRETARY LEAVITT. I hope not. I mean, I do not, I have not 

thought that through deeply enough and I appreciate you raising it and I 

will give it more thought. I will investigate that. I do not know that I 

have got a response that would be satisfying to you because I have not 

thought it through deeply enough. 
74

 MR. FOSSELLA. That is fair enough. And along those lines and I 

will follow up on our conversation then because it complements in a way 

with the notion of double counting as referred to and we are just 

concerned that with New York City, New York State sort of leading the 

way, perhaps other municipalities and States around the country have a 

lot to learn in administering Ryan White and servicing those most in 

need and will be prepared. 

 SECRETARY LEAVITT. Thank you. 

 MR. FOSSELLA. A second series of questions just deals with 

bioterrorism. As you know, Mr. Secretary, we have a similar problem 

with Homeland Security funding. There are two little pockets of money. 

One sends money to 50 States and four cities for detection and 

monitoring both from CDC and hospital readiness. And the other is 

Cities Readiness Initiative or CRI sends money directly to 23 cities. And 

the program as you know is new, it is the first year. Its primary purpose 

is local planning and coordination for bioterror preparedness. A concern 

we have is that under the first part called CRI, New York City which we 

believe is still about the number one threat when it comes to terrorist 

activity is 23rd out of 23 cities in terms of per capita. It may be solid in 

terms of absolute but it is 23rd of 23. And the second part for CDC for 

public health preparedness in terms of hospital preparedness it ranks 

respectively 24th of 54 and hospital preparedness 54 out of 54. I guess 

my question to you, Mr. Secretary, is do you believe that we should be 

moving more towards a risk based approach when it comes to allocating 

bioterrorism formula or is it status quo acceptable? 

 SECRETARY LEAVITT. I believe that risk based is more appropriate 

and we are beginning to tilt our grants in that way. 

 MR. FOSSELLA. So places like New York City, or wherever that risk 

may be, should expect to see an increase in formula at least on a per 

capita basis if we move in that direction you think? 

 SECRETARY LEAVITT. In Government we are masters of 

proportionate distribution. We are not as good at risk based. We need to 

get better. There are times when proportionate distribution is appropriate 

but where we are measuring risk it is my judgment we ought to be tilting 

toward risk as opposed to proportion. 

 MR. FOSSELLA. Well I thank you because I know the House is on 

record in moving that direction, the Administration is on record with 

both Secretary Chertoff and yourself and we know it is the other body 

that seems to be an impediment to this but for the good I think of the 

American people who deserve the best when it comes to this type of 

funding and I appreciate your efforts in helping us move in that direction. 

 I yield back, thank you. 

 MR. BILIRAKIS. The chair thanks the gentleman. 
75

 Ms. DeGette for six minutes. 

 MS. DEGETTE. Thank you, Mr. Chairman. 

 And welcome, Mr. Secretary. Along with Mr. Stupak and Ms. 

Schakowsky, I was one of the three Democrats on the O&I 

Subcommittee who went to New Orleans a couple of weeks ago. And 

certainly everybody is concerned about the situation down there. But we 

were appalled but what we saw so many months later. I do not think 

anybody could agree that we are in good shape with the health care 

delivery system in New Orleans and I am sure you would not think that 

either. I mean Charity Hospital which is the safety net hospital remains 

closed to this date with no clear reopening date. The have the tents set 

up in the convention center which I guess they will be leaving in March. 

The ambulances do not have a place to go. There is no level one trauma 

center. I guess there is one opening 6 miles or so away soon, but in the 

meantime, and even after that opens with the surrounding hospitals that 

are open, what we were told is people who need to go to the emergency 

room have to wait four to 24 hours to be seen in the emergency room and 

it is the type of thing they have got 25 percent of their population back in 

New Orleans if as is projected which I think is optimistic but if 65 

percent of the population returns by the fall, we are not going to be just 

in a delay situation, we are going to be in a crisis. So kind of based on 

those observations, I have some questions for you. 

 The first question I have, Mr. Secretary, is FEMA is making a lot of 

the key decisions regarding the funding of Charity Hospital and some of 

the other public hospitals. And so my question is FEMA regularly 

briefing HHS and you as to the funding decisions that are being made 

with respect to health care? 

 SECRETARY LEAVITT. We are focused primarily on rebuilding the 

system. And the extent of the actual deliberation or briefing that is going 

on I cannot personally attest to. 

 MS. DEGETTE. Would you mind supplementing your testimony to 

let me know if there are regular briefings, how often, and if there are 

minutes kept at those briefings? 

 SECRETARY LEAVITT. You may have other things you would like to 

outline that I am prepared to answer. Obviously I am not saying 

anything, but at some point it might be helpful for you to for me to 

outline the process we are going through to help-- 

 MS. DEGETTE. Well let me ask my next question which may lead to 

that, because what I saw is that Charity Hospital, which is operated by 

Louisiana State University, estimated that it would cost $257 million to 

basically redo that facility because the old hospital was really not in line 

with modern medicine so they had this sort of exciting vision but then 

FEMA under the Stafford Act, FEMA cannot pay for a brand new 
76

hospital if the cost for rehabilitation of the original hospital is 50 percent 

or more of the cost of a new facility. So Charity is sitting here saying we 

do not have a dime from FEMA. In the meantime, the private hospitals 

are reopening but they are not level one trauma centers and furthermore, 

they are not set up to deal with the poor and uninsured like we have in 

New Orleans. And so it is like the worst nightmare of bureaucracy for 

the Charity Hospital folks because they have no money from FEMA. 

The private hospital across the street is opening up later this month 

because private insurance money paid for it. And so my concern is how-

-I know you have got a vision and I would like it if you would briefly 

talk about that vision but how long is it going to take? 

 SECRETARY LEAVITT. First, let me say that we are compensating or 

will be soon with the dollars that were recently appropriated the interim 

health care providing that is going on in parking lots and in tents-- 

 MS. DEGETTE. Well that is fine but that is not a health care system. 

You would agree with that. 

 SECRETARY LEAVITT. No, it is not. And the second thing I would 

say is I ironically was in New Orleans on the week before the hurricane 

and I was told by the head of public health there that if I were to go 

through an emergency room anywhere in New Orleans on that day 

private or public, I would have a 24 hour waiting system. Reality is that 

it was a lousy system before and-- 

 MS. DEGETTE. So you can only imagine what it is like now. 

 SECRETARY LEAVITT. No, I have seen it. I know exactly what it is 

and it needs to be improved. The third thing I will point out is that in 

best estimates the City of New Orleans will be a different place and will 

have different meaning than before. There are a lot of proprietary 

interests right now and I do not mean that just to imply profit and nonprofit. I mean to say that there are a lot of large hospitals and they are 

not going to need all the large hospitals they had before and they do not 

want, we do not want to have a system that is like they had before where 

the only place you got treated was in an emergency room. What we want 

is a system that responds where everybody has a medical home where 

they are able to get help in community health centers and centers that 

ultimately funnel people into a primary care system and where people 

have the capacity to get health care when it is needed. 

 MS. DEGETTE. That is great. When is it going to happen, Mr. 

Secretary? 

 SECRETARY LEAVITT. Well it is going to happen as rapidly as the 

local community can rebuild it. We stand ready-- 

 MS. DEGETTE. Well how can they rebuild? I mean Charity Hospital 

cannot rebuild under any scenario because they do not have private 

insurance like the private hospitals do. They rely on State and Federal 
77

dollars and the Federal Government has not given them a dime or any 

indication when they are going to approve some plan that will give them 

a dime. 

 SECRETARY LEAVITT. We obviously need to continue this 

conversation. We are paying their Medicare and their Medicaid or will 

be paying their Medicare and Medicaid claims. There are questions in 

the medical community, the broader medical communities as to how to 

reconstruct it. The role of Charity Hospital is still very much part of 

discussion there. And that is the reason there is a delay because they 

need to have a plan, a comprehensive plan that will say here is what we 

want this to look like. And just going off and building or rebuilding one 

hospital is not going to-- 

 MS. DEGETTE. Right, but Mr.--I know my time is up and not to beg 

the question but it is like the cart and the horse. They cannot have a plan 

if the Federal Government is not working with them as a partner to let 

them know how much Federal funding they are going to have. 

 SECRETARY LEAVITT. We are working with them every day. 

 MR. BILIRAKIS. Mr. Terry for six minutes. 

 MR. TERRY. Thank you. 

 Thank you, Mr. Secretary for being here and I have a series of 

questions regarding Part D dual eligibles long-term health care and our 

pharmacists and if that was answered in the ten minutes I had to excuse 

myself for another meeting and come back I apologize but in the old 

Washington list and if it has been said before it has not been said by me 

and therefore you are going to hear it again. As mentioned to you at 

another time at least in the State of Nebraska, I am sure it is similar in 

other States regarding the prescription D sign up of dual eligibles there 

seems to be several that have been put into a program that did not meet 

their prescription needs. That is one issue. I think that one is the 

manageable one. The other one is that the State seems to have just 

missed many dual eligibles that are in no program and there seems to be 

some confusion about the dual eligibles that are in long-term care 

facilities that are not being covered or in the alternative if they were put 

into a prescription D program, the policy there being sent rather large 

bills for their co pay. Sometimes the co-pays being hundreds of dollars 

which seems to defy what we passed. So with that little bit of 

background, can you explain to me and my pharmacy and my dual 

eligible constituents what is being done so that the States or the Federal 

Government pays with dispensing pharmacists and the costs of the drugs 

that they are observing themselves which I think is pretty darn heroic of 

them to do. They do not have to do that but they are, as well as, the fact 

that they are being held responsible for the co pays for these folks. And 

as I understand there is a difference between long-term care facility as 
78

well and just your ordinary non long-term health care folks that are dual 

eligible. And the other part is there seems to be some growing fight over 

dispensing fees and whether or not your organization, or CMS under 

your leadership, can get involved and start resolving some of those 

dispensing fee issues that they, the pharmacists are being paid is less than 

the contracted price or that they are making a pharmacist submit the 

claim so many times and at 10 cents a shot in essence they are eating up 

their dispensing fee just in submitting the claim. So if you could answer 

those three questions I would sure appreciate it. 

 SECRETARY LEAVITT. If a person who is a dual eligible walks into a 

pharmacy and they do not have a plan or do not think they know what 

plan it is and the pharmacist cannot identify where they are, the 

pharmacist has the ability to enroll them in a plan on the spot. And when 

they enroll in the plan, it is called the Well Point Plan, they are then 

eligible to be reimbursed for that drug through the Well Point Plan and 

the reconciliation will be made by CMS as that the pharmacist will get 

reimbursed. In the case of co-pay, now I have been in 20 States in the 

last two weeks. I have been in pharmacies in most of them. I have stood 

at the counters, I have walked through the process with people. I have 

stood and waited for the 1-800 line to answer. I think I have got a pretty 

clear picture of what is happening. And what I find happening at the 

pharmacies is that at the beginning of the day or through the course of 

the day a pharmacy may accumulate a handful of prescriptions that they 

were not able to reconcile. At the end of the day, they have to go back 

and make the calls to Medicare but they ultimately find or work through 

the problems. What I am finding is that there are limited numbers. And 

it is limited numbers of situations where people are literally outstanding 

more than a day or two or three on a prescription. Now I acknowledge 

the fact that it has required additional work for them, and pharmacists 

have been heroic. There is little question in my mind that the entire 

pharmacy industry is being affected by this, not just Part D, but we are 

seeing a dramatic change in the way pharmacies work right now and it 

has created the same kind of problem that happened when any market 

changes. I do not know if that is responsive to all three of your 

questions, but I hope it is responsive to at least two of them. 

 MR. TERRY. Well it did not hit on the enforcement of dispensing, 

but we will get to that on different date or something. 

 SECRETARY LEAVITT. I can quickly just tell you that with respect to 

Medicare Part D, the pharmacies work with their networks and if there is 

a cost reimbursement issue it is with the network, not with CMS. 

 MR. TERRY. All right, 44 seconds left. Getting back to payments for 

those pharmacists that when they had not filled prescriptions when there 

was not a plan for a dual eligible, can they be reimbursed for that or are 
79

they going to have to eat those costs since they did not sign somebody 

up? 

 SECRETARY LEAVITT. No, if a person is over 65 and a dual eligible, 

they are in a plan. If they are not in a plan they should have been in a 

plan and the State-- 

 MR. TERRY. But some are not. 

 SECRETARY LEAVITT. Well let us work on that together because 

there are very few situations that I am aware. I know there is a solution 

to it, I just cannot come up with it sitting here. 

 MR. TERRY. I appreciate that. 

 I yield back as my time is up. 

 MR. BILIRAKIS. Ms. Capps for six minutes. 

 MS. CAPPS. Thank you. 

 Thank you, Mr. Secretary. I appreciate the opportunity to talk with 

you. Back in 1974, Congress appropriated the equivalent of $609 

million in today’s dollars for nurse education programs. The 

Administration is now emphasizing preparedness for pandemic flu and a 

threat of bioterrorism--and earlier this afternoon you mentioned 

increased dollars for pandemic flu stockpiling. I want to talk with you 

about the people who will be giving those antivirals. And I also want to 

talk about the fact that our first responders in our communities, which 

nurses are a major player for a bioterrorist attack or a flu attack are 

critical to the efforts to respond to such a situation and I’m thinking 

about the hurricanes that affected the gulf coast. Do you think you can--

we know who is in great need and some often in short supply. The 

disconnect is the fact that the President’s Budget proposes level funding 

for Title 8 nurse education programs at $150 million. This is $1 million 

below fiscal year ‘05 funding. And yet HHS’s own Budget in Brief 

quotes the HRSA report which predicts that the nursing shortage is 

expected to grow by 229 percent in 2020. Last year, the shortage of 

nurses in this country was around 7 percent, which is close to 150,000 

nurses not at their jobs doing work that is needed for today’s health care 

needs. By 2020, given this scenario, we will have over 800,000 nurse 

positions going vacant. That is without a Katrina, without the surge 

effect of a bioterrorist or pandemic flu attack. You said it is only a 

matter of time. It takes two to five years to educate and prepare a 

registered nurse. I am one, I know. You said yourself in your testimony 

that a budget is an investment in the future. Funding for nurse education 

needs to be invested now in order to expand the nurse workforce 

shortage. That would be to meet today’s needs. I want to ask you to 

respond to whether or not we have adequate nursing staff levels and 

preparation for such to provide the health care that we will surely need in 

the event of a disaster. 
80

 SECRETARY LEAVITT. Ms. Capps, may I say that I am fully 

conscious and agree with you that we have to train more nurses. I would 

like to talk about this at two levels. One is the current budget and then I 

would like to spend most of my time if I could talking with you about 

800,000 nurses in the existing system may or may not be even 

achievable. We need to begin to think about how we--we need to think 

about new ways of training nurses to step outside the traditional method 

of training where people are able to--there are a number of different 

hospitals for example who have the capacity to train credential nurses 

within the hospital. 

 MS. CAPPS. And many of them already do. 

 SECRETARY LEAVITT. And we need to expand that kind of thing 

because it allows us to do it more efficiently, and I think the argument 

can be made that it is very high level of quality. We are focused in this 

budget on actually targeting the areas where specific nurses are needed 

or specific types of nurses and types of areas we need nurses as opposed 

to a more generalized approach. We also recognize the faculty is the big 

problem. 

 MS. CAPPS. That is what I am talking about. Nurse education is 

what has declined so dramatically in funding. 

 SECRETARY LEAVITT. So we have chosen to focus our funding on 

faculty and not just the broad not-- 

 MS. CAPPS. But I do not see evidence of that. 

 SECRETARY LEAVITT. As we appropriate the dollars there will be 

over $100 million. That is the way we will be targeting our outlines. 

 MS. CAPPS. Well nurse education programs are being flat funded. 

They are going to be receiving less funding. And another thing you said 

is you would want to target them for certain specific needs but they are 

needed in every community. And now we have a model, mostly it is 

community colleges. I know particularly one challenge, which is the 

reimbursement rate for faculty positions with a master’s degree in the 

community college, are less than what is provided for a critical care 

nurse or a public health nurse within the community system. That is just 

one challenge but there are not enough dollars there to do any of the 

things that you have talked about. 

 SECRETARY LEAVITT. Well as you know our method of funding 

medical education particularly for nurses comes from a number of 

different of sources. For example, our graduate medical reimbursement 

is one method. And here-- 

 MS. CAPPS. Is that for nurses or for doctors? 

 SECRETARY LEAVITT. Well it is primarily for doctors. 

 MS. CAPPS. Yes. 

 SECRETARY LEAVITT. It does not-- 
81

 MS. CAPPS. It is much higher than that for nurses. It is woefully 

short in that area, too. 

 SECRETARY LEAVITT. Your point is a good one and I concur. What 

I am suggesting to you is that our effort here is to fund faculty positions 

more intensely. 

 MS. CAPPS. Well whatever model you are using, like some 

innovative plan within a hospital, I am open to any ideas but I have not 

seen it yet and I am hoping now that my time is just about up that there 

would be a way that I can stay in touch with you on this. I work 

regularly with schools of nursing and nurse faculty. They have talked 

with me individually and professionally within their groups and this is a 

crisis, meeting today’s needs and we can only shudder to think of what 

we will face. You can stockpile all the antivirus you want but unless you 

have somebody there to care for the sick and the dying it is not going to 

do a lot of good. 

 SECRETARY LEAVITT. Thank you. I would like to continue the 

conversation. There are some areas that I think-- 

 MS. CAPPS. Thank you. 

 MR. BILIRAKIS. Dr. Burgess for five minutes. Mr. Murphy? 

 MR. MURPHY. Thank you, I appreciate that. 

 MR. BILIRAKIS. Mr. Murphy for six minutes. 

 MR. MURPHY. I have to run out of here. Three things I want to 

mention. One Mr. Secretary has to do with the previously mentioned 

issues of the cuts in mental health funding and I recognize there are 

concerns for overlap but still the areas of mental illness are I think the 

funding for them is woefully inadequate. And as so often happens in 

Congress and in part because OMB only scores spending, they do not 

ever score savings and we have a warped sense of looking at things. 

That integrated health care what we look at how mental health funding 

and, excuse me, mental health treatment can save the costs of treating 

such things as heart disease, diabetes, lupus, back pain, and so many 

things half. I mean they are massive savings. And so I really am 

concerned about these cuts and I hope that that is something you can take 

back and look at how we can do it better. It is not just a matter of cutting 

the funding. It is doing it better, more efficiently, and looking at 

integrated care. And I just want to leave that as a comment. 

 The second thing I want to talk about with you is community health 

centers and you and I talked about this as we were walking down the hall 

here. But is legislation going to try and help us get more doctors in those 

centers? I think building these centers are a marvelous aspect, it brings 

health care to the underinsured and the uninsured. It helps to reduce the 

cost of such things as Medicaid funding by 30 percent, but we do not 

have enough doctors, nurses, podiatrists, physiologists, dentists, and we 
82

have legislation that allows doctors to volunteer. As you know that it is--

they cannot because they cannot be covered by insurance at this point. 

And I just wanted to give comment on some thought you might have 

about helping to move that. 

 SECRETARY LEAVITT. Well I was surprised that that was the case in 

our conversation and I have asked a member of my staff to help me 

understand what barriers there would be to changing it. I am in 

community health centers all over the country and I see doctors who are 

there in one fashion or another and they must be employed there and not 

volunteering. We need to enable people no matter what their capacity to 

volunteer and I am looking forward to working with you on this. 

 MR. MURPHY. I appreciate that. And you understand that if Dr. 

Burgess or I wanted to volunteer somewhere we could not do it, the 

community health centers would turn us away, but if they wanted to pay 

us it would cost even more to have us, so I appreciate that. 

 The other thing I wanted to mention is an area that the CDC has 

identified as a great concern. Another area where I think massive cost 

savings could come if we reward how hospitals and physicians and 

clinics can make an improvement. Instead we only pay for problems if it 

has to do with infections: pneumonia, methadone resistance, staph 

infections, or urinary tract infections. If a patient is in a hospital or a 

clinic or nursing home and they contract one of these, Medicare, 

Medicaid, other funds, the VA pays for that. And even if the clinic loses 

money in the process we would still pay more, and yet we recognize that 

some hospitals have made tremendous advances in reducing infection 

rates and I believe we should be doing it and drafting legislation on this 

is be able to offer some funding stream to reward them for that. CDC 

estimates there are 90,000 deaths a year from infections that occur in 

medical settings. And I wonder if you have any thoughts about this, if 

this is something the Department of Health has been looking into that 

finding a way to work with hospice clinics and practices to reduce 

infection rates and how that can save money. Again, it is one of those 

things that CDC cannot possibly score because if we were to say let us 

pay whatever that fee would be if you show, if you demonstrate reduced 

infection rates. And yet it would save, things like this could save more 

money than the other things that we are looking at in terms of--let me 

just speak to it as a potential patient, I would like to know that. I would 

like to know what the facility I am going into, how its performance has 

been on this matter because I think it speaks very much to the quality and 

this gets back to the idea of transparency and being able to give a sense 

of disclosure as what a facilities results have been. 

 We ought to be prepared to pay people better who have fewer 

infections and it ought to be known to patients if they are in a facility that 
83

has a disproportionately high number. There are some hospitals I know 

in my area in Pittsburgh which have really focused on this, and there are 

other places around the country which in essence have been able to 

reduce some infection rates post operative where everything is to near 

zero. It is I think a massive benefit and one that I would hope that HHS 

could take a careful look at. I would love to work with you in terms of 

crafting some ways of awarding hospitals. I know one of their concerns 

is once they start finding the data and reporting it that someone will sue 

them because they are finding these problems and quite frankly I think it 

is a greater benefit to our patients if we start seeing how we can help 

them so I appreciate that. 

 SECRETARY LEAVITT. Thank you. 

 MR. MURPHY. I thank you, Mr. Secretary. 

 I yield back. 

 MR. BILIRAKIS. Mr. Allen to inquire. 

 MR. ALLEN. Thank you. 

 Thank you, Mr. Secretary for being here. I have a comment I want 

to make and then some questions for you. The comment relates to the 

opening statement of the gentlelady from Tennessee who is no longer 

here but in her opening statement, she said that tax cuts lead to greater 

Federal revenues. It is not true. She has lots of company and many 

colleagues of mine on the other side of the aisle routinely say that tax 

cuts lead to increased Federal revenues. The President and the Vice 

President go out and say on a regular basis tax cuts cause added Federal 

revenues. It is not true. Last week Josh Bolton, the head of OMB when 

pinned down and he is not easy to pin down, admitted that tax cuts 

reduce Federal revenues. But he said there is probably, there is certainly 

some stimulative effect to tax cuts properly structured but the net effect 

is to reduce Government revenues. And therefore, you said in your 

opening this was a time for deficit reduction. It was a time for tough 

choices but my only point is to say in these circumstances, many of us 

feel it is morally offensive to continue to promote tax cuts at the upper 

end of the income scale and to withdrawal health care services from low 

and middle income people. That is the statement. 

 The question goes like this. The question really relates to how we 

can save money because we both agree that we need to find savings in 

these programs. I look at the proposals in your budget and I do not see 

proposals that will actually reduce the cost of health care. I see proposals 

in your budget that shift costs to States. I see proposals that shift more 

costs to seniors. I see proposals that will shift more costs to American 

families but I do not see anything in there that will actually reign in 

health care costs. It seems to me that the Administration’s idea of 

controlling costs is simply to pass the buck or the bill to someone else. If 
84

this Administration were really interested in saving money, there are 

several proposals that would save money for both the Federal 

Government and beneficiaries. 

 Right now the Medicare Payment Advisory Commission I think Mr. 

Miller would refer to it as a pretty darn good outfit and I agree. 

MedPAC nominated a number of ways that we could save money. We 

were overpaying Medicare HMO’s. MedPAC recommends eliminating 

the double payments to HMO’s for indirect medical education. Medicare 

makes direct payments to teaching hospitals, it does not need to also pay 

insurance plans for the same service. MedPAC says that would save 

$5.5 billion. Does the Administration’s budget include any proposal to 

eliminate that wasteful spending? 

 SECRETARY LEAVITT. Mr. Allen, let me just enumerate a number of 

proposals we have that I believe will-- 

 MR. ALLEN. Well can I just get an answer to that question? Does 

your, does the President’s Budget include any proposal to eliminate that 

wasteful spending? 

 SECRETARY LEAVITT. We do not view that as you have 

characterized it. We think it is critical in order to assure that we have 

availability of health choices in rural communities all across America. If 

it is not used at some point in time, the Congress may choose to consider 

it, but at this moment we believe it is necessary. 

 MR. ALLEN. Okay. MedPAC also recommends eliminating the 

slush fund. That is $10 billion at the Administration’s discretion to 

further increase overpayments to the plans. And according the CBO that 

would save $10 billion. Does the Administration support a proposal to 

eliminate this overpayment to plans? 

 SECRETARY LEAVITT. We believe that the payment structure as it is 

currently constituted is necessary in order to assure that we see a 

continued availability in every marketplace in those plans. We think that 

there is a good reason in the long-term, as well as the medium term, to 

create a competitive market that will, in fact, force the cost of structured 

health care down as we have seen it in the prescription drug benefit. 

 MR. ALLEN. Let me get to my last question. MedPAC--I take it 

your answer to both of those questions is no. MedPAC also recommends 

fixing the overpayment currently built into the risk adjustment payments 

to Medicare HMO’s, private plans that are supposed to get lower 

payments if they serve healthy and therefore cheaper beneficiaries and 

higher payments if they serve sicker and more expensive beneficiaries. 

The Reconciliation spending cut bill that just passed has phased out those 

extra payments for a few years but there is still $19 billion in savings on 

the table for that recommendation. These are all free recommendations 
85

from MedPAC. I take it that the Administration’s proposal does not 

include that final savings either. Is that right? 

 SECRETARY LEAVITT. We very clearly believe that the way to 

reduce health care costs, one of them is to have a competitive 

marketplace and we believe that is being achieved. One example I was 

prepared to cite was the prescription drug benefit where we have seen the 

costs go from $37 on average to $25 that will result in not just 

beneficiary savings but literally billions of dollars of taxpayer savings. 

 MR. ALLEN. Have you seen the study that shows that those 

payments are 80 percent higher than the VA pays for the same drugs? 

 SECRETARY LEAVITT. I have seen that and they are nowhere near an 

apples to apples comparison. 

 MR. BILIRAKIS. The gentleman’s time has expired. 

 Dr. Burgess to inquire. 

 MR. BURGESS. Thank you, Mr. Chairman. 

 Mr. Secretary, you have been here a long time and I appreciate your 

indulgence of this committee. I am going to make more of a statement 

and there will be embedded within that statement questions and perhaps 

just like Mr. Dingell I can get answers from your office on those 

questions. I will go back to the point I was making during my opening 

statement and it seems like a long time ago now but the reimbursement 

for physicians, we have got to focus on that this year. The Chairman 

brought it up, Dr. Norwood brought it up as well. There was not a single 

day when I was in the private practice of medicine or during my 

residency or during medical school where I woke up and on the way to 

work that day I said boy, I hope I can be inefficient and duplicative 

today. I always went to work to deliver my best products. So the 

concept of pay for performance is something that a lot of physicians look 

at with a lot of disdains because we came to work to do our best work 

that day anyway and you better pay up for that performance. And 

currently we are not being paid. Now you know that I spoke with 

everyone that I could find between Christmas and New Years to beg for 

administrative relief about the what is euphemistically called the 

negative update that physicians got the 1st of January because although it 

was a legislative issue and the Deficit Reduction Act did attend to that, 

there was a technical glitch that kept the Deficit Reduction Act from 

going into and having a course of law before the 1st of the year. 

 As a result, there was a negative update to physicians and I have a 

sheet of letters from doctors in my district and indeed around the county 

who sent me the letters that they are sending to their patients that I will 

no longer be able to see you on Medicare because I can no longer afford 

this continued string of cuts that is happening to my reimbursement. As 

a consequence, we are losing the doctors who are the peaks of their 
86

careers, the doctors who are the best diagnosticians, the doctors who in 

fact take the least amount of money to come to a conclusion and 

treatment plan for patients. And that is doctors that are my age. And if 

we eliminate them from the playing field, what we are going to have are 

doctors who are just out of training who inherently it costs more for them 

to deliver their care. Now if you want to structure the pay for 

performance system on top of that quandary of physicians, I submit to 

you that you are going to be diminishing the value that you are ultimately 

going to get from a pay for performance system. 

 The same would be true of an information technology system. I 

know Mr. Murphy wants to put millions and millions of dollars into 

information technology. I do, too, but if we do not pay to keep the 

doctors in the system who do the best care, then it does not matter what 

kind of information system that we have, we are not going to derive the 

value that we intend from that. 

 So again, I think we need to think outside the box. Can we pay 

doctors under Part A? I think we should look at that. I think that is a 

valid expenditure to make. Should we allow doctors to balance bill? We 

have already income related the Part B premium, why not allow doctors 

to balance bill? Chairman Barton brought that up last year during one of 

our hearings on physician payment. We have got to come up with a 

better solution than what we have been doing because just standing pat 

we are losing doctors out of the system. 

 As far as the issues in the City of New Orleans, I was a part of that 

hearing and I have to tell you that it is a stark difference between what is 

happening at LSU and what is happening across the street at Tulane and I 

eluded to that in my opening statement. Tulane was up and ready to go. 

They had stripped all the sheetrock off the walls, they had reconditioned 

their electrical equipment and refurbished their emergency room on the 

first floor of the hospital they are ready to go. Now if on your ironic trip 

to New Orleans a month or a week before the hurricane hit had you 

stopped in Tulane, you would have seen a hospital that was ready for a 

disaster. They did not know what was coming. They could have been 

the North Ridge Earthquake but it did not matter, they were ready and 

they had as a corporation sponsored DMAT teams so they had people to 

come and help them when things got tough. Now during the week of the 

storm and the flood afterwards they were in just as bad a shape as 

everyone else. But in the months that have followed, they have put a 

plan in place and yes they have some insurance money but they have also 

made a commitment to invest new capital because they want to be there 

on the ground when the city is reborn. Contrast that, and we heard 

testimony during the end of our hearing in New Orleans, other hospitals 

had a plan but they never intended to use it. And you go to the other 
87

health care facilities and they had a plan that they had purchased because 

they are required to under Medicare, but they had never opened the plan. 

Their plan remained call 911 if we get into trouble, and we all know 

what happened to that system. So all I would ask is as we funnel 

millions and millions of dollars into this recovery process, and I know 

we must, we do have to look at the things that went right and how can we 

capture those best practices for other parts of the country that may be 

exposed to other types of disasters. 

 Finally, I had an amendment on the Deficit Reduction Act that would 

have streamlined the set-up of Federal qualified health centers in areas 

that had been impacted by Hurricane Katrina and their evacuees and that 

would have included some places in Texas. For whatever reason, the 

other side pulled this out at the eleventh hour in conference committee. I 

hope you will work with us to streamline this set-up federally qualified 

health centers and these are not poor counties but they are counties that 

have significant poor populations. I have some of the highest infant 

mortality rates in the country in the City of Fort Worth in some of my zip 

codes. We needed a federally qualified health center there before 

Katrina. Now that we have so many displaced persons from Katrina, we 

need it even more or the numbers are only going to be worse this year. 

 Thank you very much for your time. 

 Thank you, Mr. Chairman. 

 MR. BILIRAKIS. I thank the Doctor. 

 Ms. Solis to inquire. 

 MS. SOLIS. Thank you, how many minutes, sir? I did not have an 

opening statement but six minutes? 

 MR. BILIRAKIS. You were not here, you waived. 

 MS. SOLIS. Okay. All right, then I will be quick. 

 Thank you, Mr. Secretary for being here. I think you may be aware I 

represent a heavily minority district in California, East Los Angeles in 

the San Diego Valley. One in three residents lacks any form of health 

care coverage and about a third of our population are children under the 

age of six without any form of health care coverage. In terms of the 

Latino community though I have some issues and concerns with respect 

to how we provide assistance to cover the 13 million Latinos that are 

currently uninsured out of the total 44 million Americans that do not 

have any health care coverage. And I say that because I understand that 

there are some programs that are currently due to be reduced and these 

programs as I understand them have provided how could I say bridging 

the gap between communities of color that would perhaps not always get 

the fair and same treatment as other communities. And I am talking in 

particular about programs like the Office of Minority Health, the 

National Center on Minority and Health Disparities, and the Preventative 
88

Health and Health Services block grant racial and ethnic program known 

as REACH. I understand that these programs are due to be cut back. Do 

you have any response to that? 

 SECRETARY LEAVITT. I am not able to respond to each of those 

individually. If you--maybe we could get that list and I could do-- 

 MS. SOLIS. I will be happy to turn this over to you so you can 

respond. 

 And the other is that in 1996, illegal immigrant restrictions to 

Medicaid and SCHIP where put into place through the welfare reform 

package but there was an attempt to try to provide coverage for the 

Latino community, vulnerable community, illegal immigrants, pregnant 

woman, children through the passage of the Immigrant Children Health 

Improvement Act. Will the Administration’s budget address the high 

number of uninsured rates in the Latino community and what potential 

for any efforts there to provide coverage to this community that receives 

now disparate treatment in health care? 

 SECRETARY LEAVITT. Well we are working with the minority 

populations in general. I would suggest that the most significant one 

would be the expansion of our community health center system. We 

have money in the budget for 302 additional or expanded services that 

will bring additional services to literally millions. A high proportion of 

those who use those centers tend to be in the communities that you have 

described. 

 MS. SOLIS. One of the concerns I have in my own district is that as 

of late in the last two years, LA County our health delivery system there 

closed 11 community health centers and I have not seen any movement 

on the part of the Federal Government to try to help provide some 

assistance there to fill that gap. I would ask that if there is a way that I 

could ascertain information as to what your plans are in that immediate 

area that you and I know is a high need locale, if you could provide us 

with evidence of any attempts or how we can work with you to see that 

these qualified health care clinics are indeed full of, listed in full capacity 

funding and helping us bridge that gap. 

 SECRETARY LEAVITT. You are probably aware that I worked with 

Governor Schwarzenegger to develop a waiver specifically targeted at 

Los Angeles County, and I am guessing the heart of your district. 

 MS. SOLIS. Yes. 

 SECRETARY LEAVITT. To provide several billion dollars over the 

course of years to assure that we are able to provide a medical home for 

them and hospital care. This was a specifically targeted waiver, and that 

would have expanded dramatically access to health care. And we are 

beginning to work to develop a pool that can in fact be used to give 

people not just uncompensated care, but actually access to a health care 
89

home, and I believe the number was a couple of hundred thousand that 

would be added to the roles of the insured through this waiver. 

 MS. SOLIS. I would like to get more detailed information. 

 And then just lastly in the last two or three months we have been 

holding our own town hall meetings and visits with seniors regarding the 

prescription program that you all are rolling out and we have heard from 

our seniors, particularly Spanish language Latino elderly that are having 

problems with interpreters providing services and the long wait on the 

telephones. And I am very discouraged with the response from the 

Administration. Many of our constituents do not have access to the 

Internet. Information has not been given to them in their language 

appropriately and culturally in my opinion and I would hope that you 

would provide us with the information on what attempts you are taking 

to make sure that that happens. I had a constituent that called me who 

had problems getting her heart medication and so I am very, very 

concerned and would like to, you know, to get feedback from you. 

 MR. BILIRAKIS. Response? 

 SECRETARY LEAVITT. I will provide you, and you will be provided, 

along with other Members of Congress next week a list of statistics on 

how many people in your district have actually enrolled and how many 

are eligible. I will also tell you that we now have the call wait time on 

our 1-800 Medicare line down to under a minute and we are offering 

Hispanic language choices that are necessary or needed. So I hope that 

will meet the needs of your constituents better. 

 MS. SOLIS. Thank you. 

 MR. BILIRAKIS. Mr. Walden to inquire. 

 MR. WALDEN. Thank you very much, Mr. Chairman. 

 Mr. Secretary, welcome and thank you for your endurance and 

patience and all of us have been able to get up and leave and come back 

and you have not moved and I admire that. 

 SECRETARY LEAVITT. Thank you. 

 MR. WALDEN. I want to follow up on what Dr. Burgess said about 

the reimbursement of physicians and other providers, especially in rural 

areas. You know, my district is somewhat like the State you were 

governor in and it is very rural, and I have got a physician out in the far 

regions of Eastern Oregon who is an internist who is probably in his 

50’s. Every time I get out there he tells me he is the last one in town. He 

oversees a health clinic that he helped the community establish that is 60 

miles from the little town he is in, and he is not making any money 

literally, and cannot quit, and cannot afford to keep going. And I am just 

concerned about the rural safety net, and I think what the Administration 

has done on clinics and expanding federally qualified clinics is terrific, 

and the Bush Administration will never get the credit that it deserves in 
90

this area, but you all hoped to save one in little old Fossil, Oregon and 

helped us establish one elsewhere and I think they are a real safety net 

and I congratulate you for that. But this issue of physician 

reimbursement is something we all need to work on in the Congress and 

the Administration. 

 SECRETARY LEAVITT. I realize that this is the time for you to ask the 

questions, but perhaps you would entertain a question. We put $25 

billion into rural health with the idea of specifically targeting 

reimbursement rates in rural America. Has that not had a positive impact 

on you? 

 MR. WALDEN. It is certainly better than not having it, but the 

problem is that it is so acute in some of these rural areas I am finding the 

same thing Dr. Burgess is. I met with a group of physicians in Bend, 

Oregon, which is not exactly a rural area in the terms of my district, and 

yet two or one of them have said they are not taking anymore Medicare 

patients in their practices because they cannot afford to. And that is an 

echo I hear throughout the district that is a real problem. Now Oregon 

has got its own set of issues. In my take we, you know, there is no cap 

on medical malpractice and that is a cost driver that is affecting them and 

how they practice medicine certainly. But it is still a major issue. I am 

one of the co-chairs of the Rural Health Care Caucus, and I thought what 

we had done when we passed the Medicare Bill was a big help and 

certainly one of the biggest packages to move forward on rural health 

care and the Administration supported it, and I think the add on we did 

for home health care made a real difference, but as you know that 5 

percent add on expired. And so we continue to just struggle. 

 SECRETARY LEAVITT. This is obviously a matter of grave national 

focus, it has to be. I hear what you are saying with respect to physicians 

who get up in the morning and go to work and what their 

reimbursements are and what they would like them to be. On the other 

hands, we are looking at a health care system that now occupies 16 

percent of the gross domestic product. Medicare alone is almost 3.5 

percent of the gross domestic product. So we have got to find some way, 

and I agree with Dr. Burgess, people do not get up in the morning and 

say, you know, I am going to go out and-- 

 MR. WALDEN. Be inefficient. 

 SECRETARY LEAVITT. --be inefficient. But they also do not get up 

in the morning and go off and say I am going to go off and resist change. 

 MR. WALDEN. Yeah. 

 SECRETARY LEAVITT. But they do. So this is really about finding 

ways to implement private practices. 

 MR. WALDEN. And that is right. I think what you are doing on 

expanding community health care centers makes a big difference for a lot 
91

of people who would otherwise when their child is ill they wait and go to 

the emergency room. If they can work with a local clinic, we can all 

save costs and they can get better health care quicker before it is an 

emergency. 

 I want to go back to Medicare in the literally one minute I have left 

because good news is never news. And I recognize when I hear from my 

pharmacists and their issues you and I have discussed, and their issues on 

the sign up and we are actually going to host two sign up sessions for 

people in March in my district in working with CMS and I thank you for 

that to help them navigate. But I am amazed 250,000 Americans a week 

are signing up. Do you have any numbers that look at how many people 

who lacked coverage, had no prescription drug coverage that now have it 

as a result of this plan? Because that was what I used to hear when I 

would go to senior centers and I know I heard in this committee nobody 

is going to offer a plan and then the drumbeat is there are too many 

choices. 

 SECRETARY LEAVITT. Over time we will find that out, but I can tell 

you it is millions that now have coverage that never had it before. And 

another figure that is not fully appreciated is the millions that will keep it 

who would have lost it. We had very impressive acceptance among 

corporate plans and retirement plans many of whom were dropping 

prescription drug benefits because of their expense, and they are now 

able to keep it. There are literally millions who have it who did not 

before. There are literally millions who are keeping it who would have 

lost it. 

 MR. WALDEN. My time has expired. Thank you, Mr. Chairman. 

Thank you, Mr. Secretary. 

 MR. BILIRAKIS. I thank the gentleman. 

 Mr. Gonzalez for six minutes. 

 MR. GONZALEZ. Thank you very much, Mr. Chairman. 

 Mr. Secretary, we may disagree some of us on this side of where I sit 

on the aisle with you but it does not mean that we do not appreciate your 

service and admire you. 

 SECRETARY LEAVITT. Thank you, Mr. Gonzalez. 

 MR. GONZALEZ. The first thing is that we will get a majority staff 

report and then we get a minority staff report and you cannot believe that 

they are analyzing the same budget. So the first question is would you 

agree or disagree with this statement. The President proposed legislative 

changes that cut $35.8 billion from Medicare Fee for Service Program 

over five years for a total of $105 billion in Medicare budget cuts over 

ten years. Yes, sir? 

 SECRETARY LEAVITT. Would that come from a majority or minority 

staff? 
92

 MR. GONZALEZ. Well I am not going to tell you but do you agree 

that is-- 

 SECRETARY LEAVITT. Well that is not one I am able to give you a 

technical response to. If you would like to give it to me I can make an 

analysis. Questions like that deserve a very thoughtful answer. 

 MR. GONZALEZ. You are starting to sound like Alan Greenspan. 

 SECRETARY LEAVITT. That is a real compliment, thank you. 

 MR. GONZALEZ. It was not meant as a compliment. I served on 

Financial Services and we never got an answer from Alan Greenspan. 

 SECRETARY LEAVITT. He was very skilled about it. 

 MR. GONZALEZ. Well he may now, now that he is a private citizen 

of sorts. Let me ask you something else that is somewhat troubling and 

of course I am reading from the minority analysis. For the first time, 

payments to Medicare providers would be automatically cut in the event 

general revenues exceed 45 percent of program funding unless Congress 

acts with its own proposals to meet the 45 percent cap. The Medicare 

Modernization Act provided that if the 45 percent was exceeded, the 

trustees would issue a warning and Congress was supposed to act. But 

the Medicare Modernization Act included no automatic cuts. That is 

true. 

 SECRETARY LEAVITT. That is true. 

 MR. GONZALEZ. Why? Why the changes? 

 SECRETARY LEAVITT. Well I think it is an acknowledgement that at 

some point in time we have to decide how many tax dollars can go into 

Medicare and how many dollars can beneficiaries and others and we just 

have to decide where the point is that we are prepared to make the 

changes. Change is not easy. I indicated earlier it is now Medicare alone 

is 3.4 percent of the gross domestic product. If it goes on until 2040 it 

becomes 8 percent. We will not have an economy that will sustain jobs 

at that point. And if we do not have sustainable jobs, we have no 

revenue to sustain Medicare. 

 MR. GONZALEZ. Wouldn’t it be more appropriate to just not leave it 

in the hands of Congress should we reach the trigger or the threshold? Is 

it not the responsibility of representatives of the people to make that 

determination on how we would address that shortage? If the trigger is 

there and we know there is a consequence, would it not be more 

appropriate rather than to have something that is automatic in nature? 

 SECRETARY LEAVITT. But Congress--the proposal is that the 

Congress could. They could implement changes that in fact would make 

it unnecessary. 

 MR. GONZALEZ. Well that leads me to my next question. Under 

what we presently have and the threshold is met as opposed to what you 

propose and it would pass obviously that it is automatic what would 
93

happen under the two different scenarios from the 45 percent when the 

threshold or the trigger is reached under the present scheme of things if 

Congress did not do anything? 

 SECRETARY LEAVITT. What we do is if Congress does nothing in 

the long-term that this system is not sustainable and we end up with a lot 

of people who lose whatever they have and that is unacceptable and we 

are proposing here is an alternative. If Congress will not act, then it will 

take an act of Congress to put into place this automatic decrease. 

Congress could very easily avoid it by taking the steps to do things that 

were hard. Let us face it, making any change in Medicare would be 

hard. So at some point if Congress is unwilling to do it, then there is at 

least a remedy that creates-- 

 MR. GONZALEZ. Then why not have this in all our different 

budgets? When we have thresholds and triggers if something would 

automatically happen rather than Congress taking the initiative or being 

proactive, I mean-- 

 SECRETARY LEAVITT. Well I think that we are in agreement that 

Medicare, it sounds as though we are in agreement that Medicare is 

unsustainable but we have got the figures of which to resolve that and 

this is one idea and I think it is a pretty good one. 

 MR. GONZALEZ. It is also a question of priorities and not just unsustainability so that leads me to the next question then. If we move 

forward with real fixes for Medicare, would it not be prudent to figure 

out what it is really going to cost to provide health care to so many 

Americans in this program? And of course I am leading right up to the 

sustainable growth rate. I always forget that. Sustainable growth rate 

formula which since 2001 everybody has been saying we have to change 

but we are not changing and we have kind of discussed it. Dr. Burgess 

had touched on it. Greg Walden touched on it. Anyone talks about it but 

we do nothing. Well there is something out there right now, some 

legislation by Clay Shaw. Do you believe that the sustainable growth 

rate formula is accurate, fair, and realistically reimburses doctors in this 

Nation for their services to Medicare patients. 

 SECRETARY LEAVITT. I think the system is not a good system. 

 MR. GONZALEZ. No, I am asking you if this particular formula that, 

under which we operate right now. This is what--the doctors are not 

going to get any more, any less unless this formula changes. I mean is it 

a fair formula, does it realistically reimburse physicians for their 

services? 

 SECRETARY LEAVITT. Congressman, I believe it is a bad system and 

by nature one that is not precise, and I believe that we would be far better 

off if we could go to a system that would begin to acknowledge the fact 

that what we are after here is not quantity, it is quality. And that if we do 
94

not do that we will continue to have this collision every year. What 

happens when we cut the rate is that we just get more procedures and the 

system continues to march toward un-sustainability in a different in a 

different-- 

 MR. GONZALEZ. But it is a flawed formula? 

 SECRETARY LEAVITT. It is a flawed system. 

 MR. GONZALEZ. Thank you very much. 

 MR. BILIRAKIS. Mr. Inslee for six minutes. 

 MR. INSLEE. Thank you, Mr. Secretary. You said a couple things in 

your opening statement that were intriguing to me. When I asked you 

about it and you said something to the affect that our hearts are full of 

compassion all of us for those who are afflicted but we hope to help 

through these programs. You also made repeated references to the 

concept that this is a time of deficits so we had to take that into 

consideration in our policies. And the budget in our review has in 

significant ways cut existing levels of programs to commit to help the 

people who are dear and tied to our compassion one of which that is 

particularly concerning to me is our rather wholesale cuts to our 

Institutes of Health research budgets which hold such tremendous 

potential. We cut the Cancer Institute for $40 million. That is real 

dollars it is actually more than in inflation adjusted dollars. I think it is 

$20 million dollars in the National Heart, Lung, and Blood Institute. 

This is very concerning because I think one of my colleagues said that 

we doubled the budget in NIH in the last ten years but we have gone up 

about 1,000 percent in our genetic knowledge and the like. We are just 

on the cusp of such tremendous advances and yet we are cutting these 

budgets at a time of tremendous advancement. 

 That causes me great concern. And I want to put this in the context 

of real people which is two citizens, Washington friends of mine. One 

has prostate cancer, a 55-year old guy had original diagnosis and surgery. 

He later had some recurrence and now is in radiation therapy. He will be 

looking for, I would think he would say it would make sense to make as 

much investment as we can in medical research to treat that disease but 

we are cutting $40 million of our existing level of research into cancer. 

Another friend of mine, he did well in the software business, and in this 

budget he is going to get about a $2 to $4 billion dollar tax cut, $2 to $4 

billion tax cut. The fist guy with the cancer we will call Fred with the 

cancer. He is getting a cut in the promise of his Federal Government to 

do something about his potentially life threatening disease. The other 

fellow, let us call him William, is getting a tax benefit of $2 to $4 billion 

out this budget. How do we possibly say that, you know, the second guy 

with the billions is entitled to more compassion in this time of deficits 

that the first with cancer? 
95

 SECRETARY LEAVITT. Let me reconcile for you the approach that 

we are taking with this because I think you yourself made the point that 

our genetic knowledge, for example, is expanding and in many other 

areas. We are still investing $4.8 billion a year in cancer research. We 

are not stopping our research, we are simply saying $4.8 billion is what 

we can afford this year. At the same time, we have an entire group of 

initiatives that will benefit every one of the institutes of NIH and at the 

heart of that is cancer. Those were valued at several hundred million 

dollars. So you can say well we are reducing that by $40 million. What 

is going on at the NCI at the same time we are doing joint projects that 

go across the entire breadth of NIH that will have substantial benefit to 

NCI. You know, let us acknowledge the fact that we are flat funding in 

this budget the National Institute of Health. 

 MR. INSLEE. I think you are not seeing my question. My question is 

to compare two individuals in different circumstances, one with billions 

of dollars and one with billions of cells that we are trying to solve cancer 

of. And my question to you is why is the first with the billions of dollars 

in this budget entitled to compassion by giving them additional tax relief 

but the second with cancer is you are entitled to less compassion than we 

had in last year’s budget because we are cutting the budget or we are 

getting dumber in our scientific knowledge and so it does not make sense 

to make any more investments, or we think we are maxed out on the 

potential human achievement for treatment of cancer. One of those 

three, or there is something about the genetic makeup of the billionaires 

in our country that exceeds in our compassion value than those with 

cancer. Now I would like to know from your Administration, and you 

are responsible for my citizens and my colleagues and my friends’ health 

care, which one of those justifies this prioritization? 

 SECRETARY LEAVITT. You are asking me to make a judgment, a 

policy judgment on tax policy or something in a debate that obviously 

will go on here in Congress. I will add that another person who got a 

substantial or will likely get a substantial tax cut is making a remarkable 

contribution to science outside of the National Institutes of Health or in 

partnership with the National Institutes of Health. The only effort that is 

growing in this Nation is not--on cancer is not what is going on at NIH 

gratefully. There are sources coming from lots of places and one of the 

places are those who have researchers in this country and make 

donations and we make--and in making that donation we give them a tax 

deduction which is essentially we are saying you do not have to pay tax 

on that money and a good share of it will go into cancer research. 

 MR. INSLEE. I want to make sure we understand the tax cuts you are 

referring to are not deductions for charitable giving. I am talking about 

eliminating the State tax, significant decreases in marginal rates for 
96

dividends and the like, do I hear you are asserting that the reason that 

you justify a cut in our Federal research budget for dealing with cancer is 

the fact that there are many generous Americans who are making 

individual contributions. Is that the reason for it? 

 SECRETARY LEAVITT. No, I am simply trying to reconcile the 

policy, the value judgment you are asking me to make and that is a tax 

issue that will be dealt with-- 

 MR. INSLEE. Well would you if given a chance, would you advise 

the President as far as your position that it would make sense between 

these two individuals that one fellow perhaps should get less of a tax cut 

and the other fellow perhaps should get better research for his cancer? 

 SECRETARY LEAVITT. The equity of that is not the subject of this 

hearing nor is it in fact that it is a policy judgment that Congress will 

need to make. 

 MR. BILIRAKIS. The gentleman’s time has expired. 

 Ms. Baldwin to inquire. 

 MS. BALDWIN. Thank you, Mr. Chairman. 

 And thank you, Mr. Secretary. I have a comment or at least a 

question for later evaluation and then a couple of additional questions. I 

know you listened attentively to all of our opening statements and I 

commented about some of my concerns with regard to the approach, the 

ideology behind how savings accounts versus other approaches we could 

take to deal with our crisis of the uninsured. On the way over here today, 

I was made aware of a report out of the Center on Budget and Policy 

Priorities that was released just today, so I do not expect you have had a 

chance to take it in, but it basically looks at the cost and coverage 

impacts of the President’s Health Insurance Budget proposal, health 

savings accounts in particular. And computer modeling reaches an 

estimate that the proposals will raise the number of uninsured in this 

country when fully implemented by a fairly sizeable number of 600,000 

people. Now I feel confident that the Administration would not be 

moving this forward had they not reached a different sort of analysis. 

But this report certainly embodies my concerns about this approach. 

And so at such time that you have had a chance to look at this and 

compare that to your own assumptions in putting together this package, I 

would be interested in hearing your evaluation and how many more 

people you think going ahead with a health savings account approach 

will ensure. 

 Now to my specific questions for now. Secretary Leavitt, in late 

August of last year, Dr. Susan Wood at the FDA Commission for 

Women’s Health and the Director of the Office of Women’s Health 

resigned over the Administration’s refusal to issue a final decision on the 

Plan B application. And she said and I quote “I can no longer serve a 
97

staff when scientists and clinical evidence fully evaluated and 

recommended for approval by professional staff here has been 

overruled.” Furthermore, a GAO report released in November of 2005 

concludes that political inference played a role in the FDA’s delay on the 

Plan B application. I guess I want to know if you are as concerned as I 

am about the possibility or allegations that political ideology is being 

placed ahead of Women’s Health and Science and an agency within the 

Department of Health and Human Services? And additionally, what are 

you specifically doing to ensure that scientists in your agency are not 

being censored by political appointees as we have seen in recent 

allegations in NASA and as we have seen and heard about in the case of 

the Plan B situation? 

 SECRETARY LEAVITT. Let me respond to both of your questions. 

First of all, I must say to you you are correct. I cannot imagine an 

analysis that would demonstrate that the President’s proposal would have 

fewer people. It is very clear from the 3 million people that now have 

health savings accounts that roughly 40 percent of them have never had 

insurance or did not have insurance before. The estimate is that you will 

see as many as 20 million people with health savings accounts by 2010 if 

the statistics hold up and there is no reason to think they will not. That 

means we will have roughly 8 million people who have insurance, many 

of whom do not have it now because of cost considerations. I could 

spend more time-- 

 MS. BALDWIN. Right. If I may, I am sure you would not have gone 

forward if you did not think there would be a net increase. I am going to 

be real interested in a more technical analysis of the different 

assumptions you make versus this report. This report that I have had a 

chance to scan today does raise the concerns that I have always had 

about using this model to address the situation but I would love to hear 

you address the question about censorship of scientists and-- 

 SECRETARY LEAVITT. I am quite aware of the basis on which those 

decisions were made. We were presented with a new policy dilemma 

involving the use of what is now a prescription drug that is available 

today through a prescription to all populations. We have been asked to 

break new policy ground that involves splitting the approval process by 

age. The decision was made that because it provided new public policy 

questions that we needed to seek additional comment which we have 

done. The comment period ended in November and those comments are 

now being analyzed. This is a process that is followed in regulatory 

agencies across the Government and it is an appropriate one. 

 MR. BILIRAKIS. The gentlelady’s time has expired. 

 All time has expired. I believe you have a unanimous consent 

request? 
98

 MR. BURGESS. Yes, Mr. Chairman, I have a unanimous consent 

request. I have some data from Texas that shows of the 2.5 million 

Medicare beneficiaries 500,000 now have prescription drug coverage 

that did not have it before January 1 and this was dated as of January 20 

and I just wanted to submit that for the record. 

 MR. BILIRAKIS. Without objection that will be the case. 

 [The information follows:] 
99
100

 MR. BILIRAKIS. Mr. Secretary, you have been a trooper. What else 

can we say? Thank you so very much for your patience and your 

consideration and your fairness. Many here have already said they were 

going to submit written questions to you. As you know, we customarily 

do that so I would ask you of course to respond to those and others that 

are submitted by the committee staff over a period of time. Thank you 

so very much for being here. 
101

 SECRETARY LEAVITT. Thank you, Mr. Chairman. 

 MR. BILIRAKIS. The hearing is over. 

 [Whereupon, at 5:28 p.m., the committee was adjourned.] 
102

RESPONSE FOR THE RECORD BY THE HON. MICHAEL O. LEAVITT, SECRETARY, U.S.

DEPARTMENT OF HEALTH AND HUMAN SERVICES

The Honorable Joseph R. Pitts:

1.) 

Question: 

 Mr. Secretary, the Deficit Reduction Act of 2005 (DRA) included language to 

reduce payments for certain imaging services provided in the physician office setting or 

at stand-alone imaging centers. The payment amounts will be reduced to the amount paid 

in the hospital outpatient setting. I am told that some codes may be reduced by over 30 

percent - and even some as steeply as 75 percent, such as for vascular imaging using 

ultrasound. While I can understand the desire to address differences in payments 

between settings, I am concerned that the hospital outpatient value was settled upon 

simply because it saved money. Has there been an analysis of whether or not the 

outpatient payment amount is adequate or appropriate? 

Answer: 

 In 2006 Medicare pays a physician $903 for doing an MRI of the brain or an MRI of 

the abdomen. Medicare will also pay a Hospital Outpatient Department (OPD) $506 for 

the exact same test. Thus, Medicare is paying almost $400 or 78 percent more for doing 

these MRI imaging tests purely depending on whether the test is performed in an OPD or 

a physician’s office. Similarly, Medicare will pay 267 percent more for doing an 

ultrasound guidance for artery repair in a physician’s office than an OPD ($228 vs. $62). 

These comparisons do not include a physician’s interpretation of the test for which 

Medicare will pay a separate fee. There is no consistency in the percentage that the 

physician fee schedule exceeds the hospital OPD payment amount. The percentage 

difference varies by procedure. 

 In the context of: (1) significantly larger payments under the physician fee schedule 

than the OPD for the same service for certain imaging services, (2) site neutral payments 

for the same service identified by MedPAC as a long term goal under Medicare fee-forservice payment systems, (3) rapid growth in Medicare spending for imaging services for 

several years, (4) MedPAC raising methodological issues that suggest relative values 

under the physician fee schedule for imaging services would be too high, combined with 

a lack of procedure and equipment specific information on alternative equipment 

utilization assumptions to use in the practice expense formula to address such issues, 

section 5102(b) of the Deficit Reduction Act of 2005 establishes a payment limit for the 

technical component of imaging services. The provision requires that Medicare not pay a 

physician more than Medicare would pay the OPD for furnishing the same imaging 

procedure. A physician’s interpretation of the test for which Medicare will pay a separate 

fee is not affected by the provision. 

 This step to level the playing field between physicians’ offices and hospital OPDs 

only applies to procedures where Medicare pays more in physicians’ offices; the DRA 

cap provision does not apply to all imaging procedures furnished in physicians’ offices. 

In addition, the percent that Medicare payment rates for physicians exceeds OPDs are not 

all as large as the examples cited above; in numerous cases, the differential is 10 to 20 

percent. Thus, the overall impact is not expected to be as dramatic as the example of 

some procedures. 

 The DRA provisions will be implemented through notice and comment rulemaking. 

These proposals are expected to be published this summer and will allow for a 60 day 

public comment period. A final rule will be published by November 1, 2006 and will be 

effective for services furnished on or after January 1, 2007. 
103

2.) 

Question: 

 As you know, the President's FY2007 budget calls for an inflationary increase in 

funding for the medical device user fee program. This Subcommittee has also shown 

support for this program by fully funding the program the last two years. Can you tell us 

how the agency is doing in regards to meeting the performance goals associated with the 

user fee program with the funding it has gotten to date? 

Answer: 

 Secretary Thompson's November 14, 2002, letter to Congress defines the 

performance objectives FDA is pursuing under MDUFMA. The commitment letter 

defines a comprehensive set of challenging goals and a schedule for meeting them. 

 FDA’s performance to meeting MDUFMA’s performance goals is, to date, 

consistent with the high expectations established for the program. We have attached 

FDA’s performance report for FY 2004. The FY2005 performance report is currently 

under review within the administration, and we will forward the report when it is 

complete. 

 To allow FDA time to build its capacity to meet the ultimate (FY 2007) goals set by 

MDUFMA, the commitment letter provides for a phased implementation of goals, with 

more goals and higher performance expectations each year. During FY 2005, 18 

additional goals went into effect (two of these apply to workloads handled exclusively by 

CBER); six more go into effect this year (FY 2006). During FY 2007, FDA will be 

responsible for a total for 77 quantitative goals covering five receipt cohorts. In addition, 

FDA is expected to pursue eight additional nonquantifiable commitments, such as 

developing an appropriate bundling policy (where FDA imposes only one fee for two or 

more closely-related applications from the same applicant), continuing its efforts to 

develop mechanisms for the electronic receipt and review of applications, and improving 

the scheduling and timeliness of preapproval inspections. 

 Although FDA does not expect to meet every goal specified by MDUFMA, the 

trends are promising. FDA is, in general, showing better performance as it implements 

new policies and procedures designed to improve the timeliness of our review processes. 

Although it is too soon to know what FDA’s final performance statistics will show – 

many goals still have applications that remain open – FDA’s performance on applications 

within more recent receipt cohorts is better than performance in older cohorts, showing 

that the improvements we have been making are beginning to bear fruit. If you had taken 

a snapshot of performance for the FY 2003, FY 2004, and FY 2005 receipt cohorts on 

December 31, 2005, you would see that FDA is meeting or exceeding 19 of the 24 goals 

in effect, and is not meeting only two goals; no applications have qualified for the 

remaining three goals. Most of these goals still have, or may have, additional FDA 

actions, so these results may change, but we are very encouraged by what we have 

accomplished so far. 

3.) 

Question: 

 During operation of the medical device user fee program, has the agency been able 

to determine specific direct and indirect costs of performing the various types of 

premarket approval (PMA) and 510(k) device approvals? Will you be able to determine 

incremental direct and indirect costs that will be associated with improving review times 

under more aggressive performance goals in future legislation? 
104

Answer: 

 FDA is engaging with industry and stakeholders as it works on MDUFMA 

reauthorization. If the MDUFMA reauthorization results in changes to the performance 

goals, we will be able to estimate direct and indirect costs. 

 During FY 2005, FDA contracted with Dr. Dale Geiger, a recognized expert in the 

field of government cost accounting, to prepare a report of the costs of FDA medical 

device review processes. Dr. Geiger examined FDA medical device reviews conducted 

during FY 2003 and FY 2004, including investigational device exemption applications, 

premarket approval applications (PMAs), PMA supplements, biologic licensing 

applications, BLA supplements, and 510(k) premarket notifications. Dr. Geiger 

examined both direct and indirect costs and this work will assist FDA with cost analysis 

in gard to the performance goals resulting from the MDUFMA reauthorization. 

4.) 

Question: 

 What criteria does the agency use to determine the allocation and priority for the 

distribution of any increase in staff across FDA components, including offices, divisions, 

branches, and districts resulting from the medical device user fees and related 

Congressional appropriations? 

Answer: 

 When MDUFMA was first enacted, FDA developed an internal plan for the 

allocation of anticipated resources—both from fees and from appropriations. In doing 

this, the agency estimated the percent of the device review workload that was performed 

in CDRH and the percent that was performed in CBER. Those initial estimates indicated 

that 83 percent of the device review work in the two centers was performed in CDRH and 

17 percent was performed in CBER. FDA’s initial allocations to the two centers of the 

total of increases for device review from both fees and appropriations were based on 

these estimates, and allocations within each center were made by Center management 

after assessing where the resources were needed to enhance the device review process as 

defined in MDUFMA. 

 From subsequent data, it is evident that this allocation to CDRH needs to be 

increased and the allocation to CBER needs to be reduced. This is because CBER 

represents a smaller percent of the combined device review work between the two centers 

than originally estimated. In addition, CBER had a well-developed IT infrastructure and 

did not need to spend as much on IT as did CDRH, so CBER was able to focus more of 

its resources on personnel. In future allocations, increases are being given in larger 

measure to CDRH. 

 In addition to the funds allocated to the two centers and to the Office of Regulatory 

Affairs (a little over 80 percent of the total of increased funds), allocations have to be 

made to accounts that support the additional FTE in the Centers and ORA. These 

planned allocations provide about 7.3 percent of the total increased funds to the Office of 

the Commissioner, about 6.2 percent for rent and rent related costs for housing the 

additional staff, and about 7.1 percent to the FDA central account, which pays for a 

variety of support costs, including the cost of local and long distance phone services, 

operation of health units, mail and document storage, and HHS charges for facilities, 

human resources, and other employee support costs. 
105

The Honorable Ed Whitfield

1.) 

Question: 

 The Deficit Reduction Act of 2005 appropriates $2 billion for use by HHS to pay the 

uncompensated health care costs of providers who have delivered care to affected 

individuals or evacuees under a Section 1115 project as a result of Hurricane Katrina. It 

was Congress’ intention that Federal Qualified Health Centers (FQHCs) and other 

providers would be eligible to receive funding under this uncompensated care pool if they 

provided care to evacuees of and individuals affected by Hurricane Katrina. 

 Does HHS intend to ensure that FQHCs are eligible to receive funding under the 

uncompensated care pool if they provide care to evacuees of and individuals affected by 

Hurricane Katrina? 

Answer: 

 Reimbursement for qualified items and services provided by Federally Qualified 

Health Centers (FQHCs) to eligible individuals will not be prohibited from 

reimbursement under the uncompensated care pools (UCCP). Eight states have been 

authorized under Hurricane Katrina Multi-State section 1115 demonstrations to 

reimburse providers that incurred uncompensated care costs for Katrina evacuees who do 

not have other coverage. States have the discretion to reimburse providers, including 

FQHCs, in accordance with the state’s approved UCC plan.

The Honorable John Dingell

1. The Budget includes Legislative cuts to Medicaid of $4.9 Billion over five years, 

and another $12.2 billion in cuts through regulatory changes, for total gross cuts of $17.2 

billion over five years. These cuts are in addition to $28 billion in cuts to Medicaid over 

10 years in the Republican reconciliation spending cut bill – the Deficit Reduction Act. 

 The reconciliation law will result in higher co-payments for healthcare services for 

13 million working families, people with disabilities, and seniors (including 4.5 million 

children), higher co-payments for prescription drugs for 20 million individuals (including 

6.6 million children), the loss of coverage for at least 65,000 people in just one year alone 

because they cannot afford higher premiums, and benefit cuts for at least 1.6 million 

people. 

 Now the President proposes a new round of cuts to Medicaid -- $42 billion over the 

next ten years. According to an independent analysis of your proposals, the primary 

savings come from shifting costs to states. 

A.) 

Question: 

 Please provide the State-by-State effect of each of the spending cuts you propose in 

Medicaid. If you cannot, explain why. 

Answer: 

 The CMS Office of the Actuary does not prepare state-by-state impact analyses of 

Budget proposals. 

B.) 

Question: 

 The proposal to restrict funding for governmental providers saved $1.2 billion over 

five years when it was in last year’s budget, and now saves $3.8 billion in this year’s 

budget. Please state exactly what has changed in your proposal to make it cut an 
106

additional $2.6 billion over five years. Why do you now think you can do this policy by 

regulation, when last year you claimed you needed legislative authority? 

Answer: 

 The President’s FY 2007 Medicaid Budget includes two related legislative proposals 

that curb questionable financing practices by providing a Federal match for only those 

funds kept by providers as payment for services (the “net expenditure” proposal) and 

limiting reimbursement levels to no more than the cost of providing services (the “cap at 

cost” proposal). It is anticipated that both of these proposals will be implemented 

through administrative authority. 

 Specifically, the Medicaid baseline for the President’s FY 2007 Budget (which 

includes both regulatory and legislative proposals) only reflects a five year $3.8 billion 

savings estimate for the "net expenditure" provision. The additional savings from the 

"cap at cost" proposal are not included in the Medicaid Budget baseline. In other words, 

a portion of the total savings from the intergovernmental transfers (IGT) proposal was 

included in the FY 2007 Budget estimates, but not all the savings that should have been. 

The “cap at cost” proposal is estimated to save $1.5 billion over five years. After 

accounting for the interactions between the two proposals’ estimates, the total net savings 

are estimated to be $5.1 billion over five years. Despite this oversight, the total savings 

for these FY 2007 Budget proposals is somewhat less than the estimate for the FY 2006 

Budget proposals because additional states have eliminated their inappropriate use of 

financing practices to maximize federal Medicaid reimbursement in the intervening year. 

 This policy will be promulgated by regulation under the authority of section 

1902(a)(30)(A) of the Social Security Act (the Act), which requires that payments be 

“consistent with efficiency, economy and quality of care.” This provision of the Act 

requires the Secretary to protect against abuses by states and providers. The taxpayer 

should not pay more to a public entity than it costs to deliver the service to a Medicaid 

beneficiary. Additional authority to protect the fiscal integrity of the program is also 

found at 1903(i)(3) and (i)(17). 

C.) 

Question: 

 The budget includes a new proposal on school-based administration and 

transportation. This proposal is a regulatory change, not a legislative one, and it saves a 

considerable amount of money. Please explain what the Centers for Medicare and 

Medicaid Services (CMS) is proposing to change with respect to services in schools? 

Answer: 

 Appropriate Medicaid services will continue to be reimbursed as allowed under 

current law. However, claiming for certain Medicaid services in school settings has 

proven to be prone to abuse and overpayments. 

 According to section 1903(a)(7) of the Social Security Act (the Act), for the costs of 

any activities to be allowable and reimbursable under Medicaid, these activities must be 

“found necessary by the Secretary for the proper and efficient administration of the plan” 

(referring to the Medicaid State Plan). Additional authority derives from section 

1902(a)(17) of the Act, which requires that states take into consideration available 

resources. Through the authority of these statutes, the Administration proposes to 

prohibit federal reimbursement for transportation provided by or through schools to 

providers. 

 HHS has had long-standing concerns about improper billing by school districts for 

administrative costs and transportation services. Both the Department’s Inspector 

General and the General Accountability Office (GAO) have identified these categories of 

expenses as susceptible to fraud and abuse. GAO found weak and inconsistent controls 
107

over the review and approval of claims for school-based administrative activities that 

create an environment in which inappropriate claims generated excessive Medicaid 

reimbursements. Audit findings from states where the OIG conducted administrative 

claiming audits have shown egregious violations. Proper and accurate claiming for 

administrative services has not been carried out in compliance with applicable Medicaid 

regulations. Overall, the leading conclusions from these audits are that most states use an 

improper allocation methodology and insufficient attention is paid to the details of the 

claiming process. 

 The President’s 2007 Budget includes a regulatory proposal that would prohibit 

Federal Medicaid reimbursement for Medicaid administrative activities performed in 

schools. It additionally proposes that Federal Medicaid funds will no longer be available 

to pay for the transportation to and from school related to medical services provided 

through an Individualized Education Program (IEP) or Individualized Family Service 

Plan (IFSP). 

Schools would continue to be reimbursed for direct Medicaid services identified in an 

IEP or IFSP provided to Medicaid eligible children, such as physical therapy and 

occupational therapy that are important to meet the needs of Medicaid-eligible students 

with disabilities, as long as the providers meet Medicaid provider qualifications. 

We estimate that these proposals will save $0.6 billion in FY 2007 and $3.6 over five 

years. 

D.) 

Question: 

 Under current law, the Social Security Act at section 1903(c) reads, “Nothing in this 

title shall be construed as prohibiting or restricting, or authorizing the Secretary to 

prohibit or restrict, payment under subsection (a) for medical assistance for covered 

services furnished to a child with a disability because such services are included in the 

child’s individualized education program established pursuant to part B of the Individuals 

with Disabilities Education Act or furnished to an infant or toddler with a disability 

because such services are included in the child’s individualized family service plan 

adopted pursuant to part H of such Act.” In light of this language, what is the legal basis 

for the authority to terminate Medicaid payment for these services? 

Answer: 

 According to section 1903(a)(7) of the Social Security Act (the Act), for the costs of 

any activities to be allowable and reimbursable under Medicaid, these activities must be 

“found necessary by the Secretary for the proper and efficient administration of the plan” 

(referring to the Medicaid State Plan). Additional authority derives from section 

1902(a)(17) of the Act, which requires that states take into consideration available 

resources. Through the authority of these statutes, the Administration proposes to 

prohibit federal reimbursement for transportation provided by or through schools to 

providers. 

E.) 

Question: 

 The budget states that CMS will also issue regulations that restrict the services that 

States can provide under the category of rehabilitation services. Please provide further 

details on the proposed rules and what services will continue to be permitted. Also, 

please cite the statute or regulation that gives you the authority to make this change. 

What States will this provision affect? 
108

Answer: 

 Rehabilitation services are an optional Medicaid service under Section 1905(a)(13) 

of the Social Security Act (Act) and defined at 42 CFR 440.130(d). Rehabilitative 

services are typically offered to individuals with special needs or disabilities to help 

improve their health and quality of life. Under current practices, states are billing 

Medicaid for rehabilitation services that are intrinsic elements of non-Medicaid 

programs. For example, CMS has determined that the costs of therapeutic foster care 

services, adoption services, family preservation and family unification services are being 

shifted by some states from foster care to Medicaid. Under the rubric of therapy support 

services, states are also shifting costs of non-medical support services and routine 

supervision provided by teacher’s aides in school settings to Medicaid. Also, states are 

claiming for services that are not rehabilitative, which were previously approved by CMS 

as rehabilitation services.

 All states provide rehabilitation services as an optional benefit in Medicaid. States 

can also provide rehabilitation services through home and community based services 

(HCBS) waivers, but the provision of such services through HCBS waivers would not be 

impacted by this proposal. 

 The FY 2007 Budget proposes to prevent cost shifting by issuing a regulation that 

would clearly define allowable services that may be claimed to Medicaid as rehabilitation 

services and exclude payment for rehabilitation services that are intrinsic to programs 

other than Medicaid. The regulatory change will also clarify that Medicaid payments will 

be available for rehabilitation services that are intended for the maximum reduction of 

physical or mental disability and restoration of an individual to the best possible 

functional level. 

 Through review of State Plan Amendments (SPAs), CMS has found that, by using 

overly broad definitions of rehabilitative services and payment methodologies that are not 

tied to specific covered services, states are bundling services together which Medicaid is 

not supposed to pay for at all, such as room and board. CMS has also found that these 

methods serve to effectively circumvent the statutory IMD exclusion, and the principle 

that Medicaid is the payer of last resort. To address these concerns, we find authority in a 

variety of places in title XIX of the Social Security Act, including sections 1902(a)(4)(A), 

1902(a)(30)(A), section 1903(i)(17), and section 1905(a). 

 The Administration does not develop state-by-state estimates on legislative 

proposals. 

F.) 

Question: 

 Given that many States already have preferred drug lists and requirements that 

beneficiaries use generic drugs, what new authority are you proposing to give States? 

Answer: 

 The President’s FY 2007 Budget proposal would allow States to use private sector 

management techniques to leverage greater discounts through negotiations with drug 

manufacturers through managed formularies. 

 The Administration is currently developing the specific details of this proposal. 

Formulary Classifications and Coverage:

1.) 

Question: 

 Last June, CMS issued an important clarification of its guidelines to drug plans 

submitting bids for the Part D program. This guidance stated that CMS would require “all 

or substantially all” drugs to be covered by the plans in six categories: antidepressants, 
109

antipsychotics, anticonvulsants, anticancer drugs, immunosuppressants, and drugs for 

HIV/AIDS. The guidance was based on the complexity and high cost of the diseases that 

these drugs treat, as well as evidence-based practice. Also stated was CMS’s expectation 

that plans would not use management techniques such as prior authorization or step 

therapy for patients stabilized on crucial drugs in these categories. Since January 1, 2006, 

however, a widespread problem of plans not fulfilling this guidance has been reported. 

Patients who had been stabilized on a drug from one of these six important categories are 

being told at their pharmacy that their drug will not be covered. 

A.) 

Question: 

 What enforcement measures will CMS provide to ensure plans provide access to 

these vital medications? Has CMS taken any enforcement action to date against plans 

that were not complying with these requirements? 

Answer: 

 Plans are required to meet Part D program and contractual requirements as a 

condition of participation. In the formulary area, CMS has in place a thorough review 

process for Part D plan formularies, which must be satisfied before a plan can be 

approved to participate in the program. Formularies are reviewed pursuant to 13 different 

criteria that ensure beneficiaries have access to the medicines they need at competitive 

prices. CMS will continue to monitor plan formularies throughout a plan year to ensure 

that beneficiaries have appropriate access to covered drugs. A plan found out-ofcompliance will be instructed by CMS to immediately resolve any formulary 

deficiencies. Plans also have been advised that failure to satisfactorily comply with Part 

D program requirements in 2006 is grounds for non-renewal in 2007. 

B.) 

Question: 

 This requirement is only in effect for the first year of the benefit. Does CMS plan to 

continue to require plans to cover all or substantially all drugs in these categories in the 

future as well? 

Answer: 

 Yes. CMS has issued guidance on drug formulary requirements for the 2007 

contract year. This guidance retains the requirement that plan sponsors include on their 

Part D plan formularies “all or substantially all” drugs in six categories: antidepressants, 

antipsychotics, anticonvulsants, anticancer drugs, immunosuppressants, and drugs for 

HIV/AIDS. 

C.) 

Question: 

 What is CMS’s authority to require a 90-day transition period? Are plans required 

to follow this CMS guidance or is it optional? What recourse does CMS have against a 

plan that does not follow this requirement? 

Answer: 

 Under 1860D-11(d)(2)(B) of the Social Security Act, CMS has authority, similar to 

the Director of OPM with respect to health benefits, to prescribe reasonable minimum 

standards for health plans. Under this authority we have required all Medicare drug plans 

to offer enrollees a transition process. CMS has an ongoing compliance monitoring 

program in place, and will follow-up with plans and take enforcement actions if 

necessary to ensure compliance with requirements. 
110

2.) 

Question: 

 On February 3, 2006, CMS released guidance on the coverage of Niacin, stating that 

beginning June 1, 2006, it would no longer be covered under the Part D benefit, but until 

that point, plans that had advertised covering Niacin must continue to do so. It is my 

understanding that the AARP plan was not in compliance with this CMS directive and 

was excluding coverage of this medicine. What actions has the Department of Health 

and Human Services (HHS) taken to ensure private plans are following this directive? 

What sanctions have been levied against noncompliant plans? 

Answer: 

 CMS has issued more recent policy clarification regarding prescription Niacin 

products. This policy clarification supersedes our February 3, 2006 letter. 

 The Food and Drug Administration has determined Niaspan and Niacor to be safe 

and effective drugs, used therapeutically for the treatment of dyslipidemia, and that they 

do not serve as nutritional supplements or address vitamin deficiency. Additionally, 

these products are used at dosages much higher than appropriate for nutritional 

supplementation. For these reasons, CMS has superseded its initial February 3, 2006 

letter and determined that these products should not be considered prescription vitamins 

for purposes of Part D coverage. The new policy guidance does not require plans to add 

these products to their formularies for 2006. However, for the 2007 contract year, 

prescription Niacin products should be considered for formulary inclusion similar to all 

other Part D drugs. 

Part D

1.) 

Question: 

 What steps is HHS taking to assist dual eligibles who have medicines that are not 

preferred (with respect to cost-sharing) under their plan’s formulary to either appeal so 

that those medicines are moved to a preferred tier or to assist the beneficiary to either (a) 

move to an alternative but equally effective medicine or (b) move to a plan with lower 

out-of-pocket costs? 

Answer: 

 It is important to keep in mind that the cost-sharing structure for dual eligible 

beneficiaries is outlined in statute. Therefore, dual eligible beneficiaries are not subject 

to specific formulary cost sharing structures of the various prescription drug plans. 

 With regard to off-formulary drugs for dual eligibles, CMS has required Medicare 

prescription drug plans to establish an appropriate transition process for new enrollees 

including full-benefit dual eligibles who are transitioning to the Medicare benefit from 

other prescription drug coverage. CMS believes that a requirement for an appropriate 

transition process balances the protection of certain vulnerable populations with the 

flexibility necessary for Medicare prescription drugs plans to develop a benefit design 

that promotes beneficiary choice and affordable access to medically necessary drugs. All 

plans transition processes address the plan sponsor’s method of educating both 

beneficiaries and providers to ensure a safe accommodation of an individual’s medical 

needs with the plan’s formulary. 

 We understand that many plans have systems in place that trigger a written notice to 

the member when a plan provides a transitional first fill of their prescription. Other plans 

provide instructions through their contracted pharmacies. In whatever the form, we have 

noted to plans that the instructions to the beneficiary should: 
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(1) Explain that the supply is temporary, 

(2) Indicate that the member needs to work with the plan and his or her physician to 

identify appropriate drug substitutions, 

(3) Advise that the member has a right to request a formulary exception, and 

(4) Provide the procedures for requesting such an exception. 

 Additionally, full benefit dual eligibles have the opportunity to change plans at 

anytime. We feel these protections will help ensure dual eligibles have access to 

necessary medications under the new Medicare prescription drug benefit. 
112

The Honorable Elliott Engel:

1.) 

Question: 

 Redistribution of Ryan White Resources: The Administration’s Ryan White 

reauthorization principles make it evident that there is momentum toward the 

redistribution of CARE Act funds. It appears that the goal of the Administration is to 

shift funds among jurisdictions through drastic changes in funding formulas, restrictions 

on the use of funds, and the elimination of provisions that limit the loss of resources to 

jurisdictions over time. An examination of the effects of the principles indicates that 

funds would be redistributed in a manner that will harm persons living with HIV and 

AIDS in many of the States that are impacted most heavily by the epidemic. What is the 

rationale for shifting funds around? We are not faced with a shifting epidemic. Rather, 

we are faced with an expanding epidemic. There is not a single jurisdiction in which this 

epidemic has stabilized or diminished. I’ve heard references to jurisdictions with “older” 

epidemics and inferences that an “older” epidemic is somehow more stable. But the 

reality is that an older epidemic is likely to be a much more expensive one to manage. 

And we know that all jurisdictions are seeing new infections each year and increasing 

numbers of persons with HIV and AIDS requiring a range of services. The state of 

emergency associated with this epidemic is not confined to one region, but continues in 

heavily impacted States and throughout the Nation. It would seem that if Ryan White 

funds are to follow the epidemic, they must continue to flow to all jurisdictions and be 

increased in order to address overall increased need. I’ve heard discussion around 

“reforming” and “modernizing” the CARE Act, but I hope these are not euphemisms for 

taking resources away from some people living with HIV and AIDS in order to shift 

funds. Again I would ask, what is the rationale for redistributing funds, and why do the 

Administration’s principles focus on shifting badly needed funds around instead of 

enhancing resources and services in all jurisdictions? 

Answer: 

 The Administration’s Principles and proposal focus on the best way to distribute the 

monies already appropriated by Congress and does not focus on new congressional 

appropriations. Both the IOM report “Measuring What Matters” and the recent GAO 

report, “Changes Needed to Improve the Distribution of Ryan White CARE Act and 

Housing Funds” have concluded that there are large disparities in per case funding of 

HIV/AIDS due to multiple provisions in the Act which result in a distribution of funds 

among grantees in a manner that does not reflect the relative distribution of AIDS cases 

in these jurisdictions. If additional funding were made available without removing these 

provisions, we would not achieve the goal of redistributing funds more equitably as funds 

would flow to the same jurisdictions that have higher per case funding at the present time. 

2.) 

 Elimination of "Double Counting”: I have a few questions about the 

Administration’s reauthorization principle that calls for the elimination of so-called 

“double counting” of AIDS cases between Title I metropolitan areas and States, which 

the principle maintains contributes to an unequal distribution of Federal funds. 

a.) 

Question: 

 First, the principle suggests that an equal dollar-per-case distribution of Ryan White 

funds can be achieved by adjusting the Title I and Title II formula awards only, thus 

disregarding the rest of the CARE Act, including Title I supplemental awards as well as 

Title III, Title IV, and Part F awards. The principle states that its goal is to count every 
113

AIDS case equally and distribute funds in a fair manner. How can this goal be achieved 

when the principle fails to consider funding from all titles of the CARE Act? 

Answer: 

 The 80/20 provision was instituted in the 1996 reauthorization to adjust for concerns 

that combined Title I and Title II funds in states with EMAs caused more funding per 

AIDS case than states without EMAs. This provision created a two-part formula for Title 

II base funding that takes into account the number of AIDS cases that reside within the 

state but outside of any EMA’s jurisdiction. The methodology is as follows: The most 

recent 10 years of ELCs are calculated for all states and territories. 80% of the ELCS 

(award is) are divided among all states and territories based upon each state’s proportion 

of the total ELCs in all states and territories. The remaining 20% is based upon each 

state’s proportion of the total ELCs in all states and territories that are located outside the 

EMAs within a state. However, this does result in the double counting effect. In effect, a 

portion, but not all of the cases attributed to an EMA in a state are counted twice in 

calculating the Title II base award. Eliminating the “double counting” phenomenon 

would mean that the state’s base award, in a state with EMA(s), would be based solely on 

the ELCs in the non-EMA area of the state. 

 The Administration, after much deliberation, has determined that the Title structure 

of the Ryan White CARE Act should remain. The findings of both IOM and GAO are 

conclusive: without altering several legislative provisions that create structural barriers 

under Titles I and II in the CARE Act, funding per AIDS case will continue to vary 

greatly. Because of the current structural barriers, the CARE Act will be unable to 

distribute funds equitably and effectively address unmet need across the country. Our 

goal is to distribute CARE Act dollars equitably so that funding is available to serve 

individuals living with HIV/AIDS who cannot afford to pay for the care they need. 

b.) 

Question: 

 Second, I have a concern about the impact of this principle on the jurisdictions with 

the largest numbers of persons living with HIV and AIDS. Consistent with its intent – to 

direct assistance to the jurisdictions disproportionately affected by the epidemic – the 

CARE Act has provided direct funding to metropolitan areas impacted by the epidemic to 

ensure a coordinated local response. At the same time, the CARE Act has recognized the 

key role of States -- which administer Medicaid and regulate the health care, health 

insurance and other key sectors -- in coordinating a statewide response, by giving States 

partial credit for their AIDS cases in Title I cities. These considerations are equally valid 

today. Any application of this principle will lead to a devastating loss of resources to 

high-prevalence States. For example, eliminating the statewide component of the Title II 

formula would lead to a loss of about $54 million in the five highest prevalence States – 

New York, California, Florida, Texas and New Jersey. These five States are home to 

more than half of all Americans living with AIDS. Six additional jurisdictions would 

lose more than half of their Title II base funding for HIV care – the District of Columbia, 

Massachusetts, Connecticut, Missouri, Nevada, and Minnesota. In all, 18 States would 

lose more than $76 million in Title II funding. While some areas undeniably need 

additional funding, is it reasonable to reduce resources in the jurisdictions that are hardest 

hit by the epidemic? 

Answer: 

 The President’s Principles call for more equitable distribution of CARE Act funds, 

which is paramount in the reauthorization. Changes in the CARE Act are not intended 

destabilize services, but are designed to assure that persons in need of HIV services and 

unable to pay for them shall be able to receive those services, both in urban communities 
114

and in rural communities. By maintaining important provisions in the legislation, such as 

maintenance of effort and matching fund requirements, the Administration will ensure 

that states continue to contribute state and local funds to critical HIV/AIDS services to 

minimize any impact that redistribution of CARE Act funds might have. 

b.)ii. 

Question: 

 How would the Administration propose to address possible funding reductions in the 

highest prevalence States? Wouldn’t a more reasonable approach involve increasing 

resources to address overall increased need and to assure that all persons living with HIV 

and AIDS have access to care? 

Answer: 

 The Administration’s Principles related to equity in funding distribution are based 

on current funding levels and do not address additional Congressional appropriations as a 

means to attain equity among jurisdictions and States. If additional funding were made 

available without removing these provisions, we would not achieve the goal of 

redistributing funds more equitably as funds would flow to the same jurisdictions that 

have higher per case funding at the present time. 

 

3.) 

Question: 

 My question on the SNCSI principle relates to the index itself. The development of a 

needs-based index is of concern insofar as data that would be used to make allocation 

decisions might not be universally available. For example, one important measure of 

need would be HIV cases, but we know that name-based HIV surveillance data is 

collected in only 33 states. When data are not universally available for eventhe most 

basic measure of need for HIV services, is it your belief that a meaningful, scientifically 

sound, feasible needs-based funding formula is possible at this time? 

Answer: 

 The Administration’s CARE Act reauthorization principles call for the 

establishment of objective indicators to determine severity of need (SON) for funding of 

core medical services and proposes that such an index take into account HIV prevalence, 

poverty rates, availability of resources including local, state and Federal programs and 

support, and private resources. There are established national data bases from sources 

including Census, Labor, CDC, CMS, HRSA that are being examined by HRSA in 

response to the IOM report, “Measuring What Matters: Allocations, Planning, and 

Quality Assessment for the Ryan White CARE Act,” that may be utilized in the 

development of a meaningful and scientifically sound needs-based funding formula. 

Insofar as the status of HIV surveillance data collection by all states, the CARE Act 

requires that all states have HIV reporting in place by 2007 to receive formula grants 

under Titles I and II of the Act. The fact that the SON index will need to take into 

account HIV data means that there will need to be close coordination in the 

implementation of both HIV data and the SON index proposals. 

b.) 

Question: 

 My question relates to the existing Title I and Title II formulas, which are based on 

estimated living AIDS cases involving a weighted, ten-year case count. The formula 

does not account for people living with AIDS diagnosed more than ten years ago, who 

are likely to be the persons requiring the most intensive services. The formula might 

have been appropriate when the CARE Act was first authorized, but today, due to 
115

successes in terms of treatment, people with AIDS are living much longer. I know the 

Administration’s principles support changing the formula to incorporate a SNCSI, but if a 

scientifically sound, feasible needs-based index is not forthcoming, how would the 

Administration propose to distribute resources in a manner that considers all persons 

living with this disease that need services? 

Answer: 

 The Administration’s Principles for reauthorization of the CARE Act, propose key 

new provisions that will distribute resources in a manner that follows the epidemic, 

including: 

• Using HIV Cases in Formula -- Maintain the current statutory requirement that 

all states submit HIV data by the start of fiscal year 2007. Having the full 

scope of HIV is critical to successful care and treatment programs that prevent 

people from advancing to AIDS. 

• Eliminating Double Counting -- Eliminating the double counting of HIV/AIDS 

cases between major metropolitan areas (Title I) and the states (Title II). 

• Eliminating Hold-Harmless Provision -- Eliminating current provisions that 

entitle cities to be “held harmless” in funding reductions. 

 The elimination of these provisions will better target funds to heavily impacted 

communities and aid in getting persons with HIV/AIDS into care earlier in disease 

progression by assuring every AIDS case is counted equally and areas get the funding 

assistance they need. 

c.) 

Question: 

 Still another concern about the SNCSI principle is the proposal to use HIV incidence 

– or new cases of HIV per year – as an indicator of need, when the true indicator of need 

would be HIV/AIDS prevalence – the total number of persons living with HIV and 

AIDS. Medical advances, reductions in deaths, and new infections each year result in 

more and more people living with this disease. The goal of addressing this epidemic can 

only be achieved by recognizing all persons living with HIV and AIDS who need 

services. All that said, why propose a formula that fails to consider all of the individuals 

we are seeking to serve by awarding funds based only on new cases of HIV? 

Answer: 

 One variable under consideration for the Severity of Need Index is HIV prevalence. 

 A number of other data elements from CDC’s HIV/AIDS Reporting System (HARS) 

will also be considered in the development of the index. HIV prevalence will be 

examined by stage of disease (HIV or AIDS); progression to an AIDS diagnosis with a 

year of the HIV diagnosis; AIDS diagnosis without a previous HIV Diagnosis; HIV 

prevalence by age, race/ethnicity, and gender. 

d.) 

Question: 

 A final concern about the SNCSI principle is that it cites significant differences in 

access to HIV care throughout the country and recommends a drastic change to the 

formula for allocating funds to States and localities. The principle suggests that 

differences in Ryan White Title I and Title II funding to States are responsible for 

different levels of HIV/AIDS services among States. I think we can safely say that 

differences in access to services are attributable to many factors, including the differences 

in resources that States, themselves, provide for the care of persons with HIV/AIDS as 

well as the services available through medical assistance programs. Is it realistic to view 
116

a single financing mechanism – specifically, the CARE Act -- as the means to equalize 

these inherent differences? 

Answer: 

 It is not realistic to view a single financing mechanism as a means to equalize 

differences in HIV/AIDS resources across the country. Congress has had an implicit 

expectation that State and local governments, other funders, grantees, and subgrantees 

would share the financial burden of HIV treatment and support services. The expectation 

that States would contribute financially to HIV services was underscored through the 

CARE Act State payer of last resort, maintenance of effort, and matching funds 

requirements. While the current economic climate is compounding the pressure on the 

federal government, states, and localities to control health care expenditures, these CARE 

Act legislative provisions go far in assuring that all other private and public financial 

resources are utilized before CARE Act funds are tapped for payment of HIV/AIDS care 

and treatment. Thus provisions in the CARE Act such as these serve as a means to 

require states and localities to maintain existing HIV/AIDS financing resources and 

protect critical CARE Act dollars from being used to supplant other available resources. 

4.) 

Question: 

 Seventy-five Percent Set-Aside for Core Medical Services: One of the 

Administration’s principles calls for the establishment of core medical services and 

would impose a requirement to use 75 percent of Ryan White funds for these core 

medical services. This requirement is inconsistent with years of publicly funded health 

and social services that have recognized the key interplay between medical care and other 

services, including but not limited to adequate nutrition, housing, case management 

(especially for persons with complex medical care needs), and outreach and education to 

bring people into care and to prevent further transmission. Recognizing that the CARE 

Act is but one component of a wide array of publicly financed health and medical care 

programs, and that the CARE Act is intended as payer of last resort, it would seem more 

efficient to allow jurisdictions to utilize funding as appropriate based on local needs and 

priorities. Variability among States in terms of populations impacted and their needs, 

alternative sources of financing and health coverage, and a wide array and composition of 

health and social service providers suggest that the flexibility that has been a hallmark of 

the CARE Act should continue. Perhaps encouraging Medicaid expansion programs for 

people with HIV would prove to be more beneficial than imposing restrictions on CARE 

Act funds with regard to core services. The Early Treatment for HIV Act, which I tried to 

pass in the Energy and Commerce Medicaid markup comes to mind as a reasonable 

means of enhancing access to medical services. It is not clear that creating parameters 

regarding allowable uses of CARE Act funding will result in increased or enhanced 

coverage. Finally, it is my understanding that most, if not all, jurisdictions that receive 

Ryan White funding do not support this principle. What is the rationale for or proposed 

benefit of imposing this sort of restriction? Is there research to suggest that imposing this 

type of requirement will result in better managed services? 

Answer: 

 Advancements in HIV/AIDS care and treatment mean that people living with 

HIV/AIDS are living longer and healthier lives. Efforts to identify persons earlier in 

disease progression and bring them into care also means an increasing numbers of 

uninsured or underinsured are dependent on the CARE Act for care and treatment. In 

2004, 71% of CARE Act funding was directed to health care services and medications. 

An additional 9% of CARE Act funding supported case management services. The 

establishment of a minimum limit of 75% reflects the amount of CARE Act resources 
117

that will minimally need to continue to meet this need. HRSA does include housing 

assistance in its definition of health related support services. Job assistance services are 

not eligible for funding under the CARE Act. We are not aware of any research that 

suggests increasing the threshold to 75% will result in better managed services. It is 

important that care coordination is an integral part of core medical services provided 

under the CARE Act in order to assure optimum management of patient care and 

program services. 

a.) 

Question: 

 AIDS Drug Assistance Program (ADAP) I have two questions about AIDS Drug 

Assistance Programs. My first question relates to fiscal year 2006 funding. AIDS Drug 

Assistance Programs across the country currently have nearly 1,000 people (954) on 

waiting lists. After rescissions, the FY06 budget provides a negligible $2.2 million 

appropriation increase nationally for this vital program that has a historical growth rate of 

more than $100 million per year. We applaud the President’s proposal to add $70 million 

to the FY 07 budget to address ADAP need. In light of the President's FY 07 proposal, 

will the Administration support an emergency appropriation for ADAPs during FY06 to 

prevent the growth of waiting lists, or will people living with HIV/AIDS in need of 

medications have to wait another year for relief? 

Answer: 

 The Administration does not plan to seek an emergency appropriation for ADAP at 

this time. 

b.) 

Question: 

 Second, again, while we applaud the Administration’s proposal to provide $70 

million in additional funding to address ADAP waiting lists, my concern is that limiting 

the use of the funding to the elimination of waiting lists does not address the complexity 

of the issue. I think we all agree that all Americans should have access to the 

medications they need to stay alive. ADAP was constructed and continues as a payer of 

last resort, providing access to costly medications when there is no other source of 

coverage or the individual cannot afford to pay for the medications. Similar to variations 

in Medicaid, States have constructed widely varying ADAP programs in terms of 

eligibility, formularies, etc. Because Federal funding has not kept pace with ADAP 

program growth, some States have waiting lists for medications. But it is also true that in 

order to avoid the development of waiting lists, some States have instituted other cost 

containment measures, such as eligibility restrictions and reduced formularies. The end 

result is even more variation in access to care. It seems that providing funding for States 

that have ADAP waiting lists, without considering the composition of ADAP programs 

and eligibility standards, especially in those States that have initiated or plan to initiate 

cost containment measures, will not be an equitable way in which to address the ADAP 

crisis. Instead of limiting the additional ADAP resources to States with waiting lists, 

wouldn’t it be more beneficial to expand the eligibility for these funds in order to 

enhance ADAP resources in all jurisdictions that are struggling to provide medications to 

their residents with HIV and AIDS? 

Answer: 

 The $70 million will be used to help the States end current ADAP waiting lists and 

help support care for additional patients. The funding mechanism is under discussion 

within the Department. 
118

6.) 

Question: 

 Elimination of “Hold Harmless” Provisions: The principle that calls for the 

elimination of provisions that entitle cities and States to be held harmless is a major 

concern. The “hold harmless” provisions limit the extreme service disruptions that would 

result from the precipitous loss of resources to a jurisdiction and give time for a local 

response to ensure that no one loses critical services. It is in light of the Administration’s 

apparent intent to redistribute CARE Act resources that I raise this concern. The 

elimination of the “hold harmless” provisions might be viewed as a means of fostering 

shifts in funds to address disparities. However, these disparities cannot be corrected 

through major shifts in resources between states without compromising services for 

persons living with HIV and AIDS in jurisdictions that lose funding. How would the 

Administration propose to address the disruption in services that would accompany 

drastic reductions in resources in some jurisdictions as a result of the Administration’s 

principles? And again I have to ask – wouldn’t a better approach be to increase resources 

to keep pace with the continued growth of the epidemic and address overall increased 

need? 

Answer: 

 The Administration is attempting to respond in two ways: 1) by seeking to increase 

funding resources for HIV/AIDS care and treatment as reflected in the President’s 

FY2007 budget; and 2) by proposing through the Admnistration’s Principles the 

elimination of structural barriers in the CARE Act to allow better targeting of these new 

dollars to respond to the epidemic in our hardest hit communities. 

7.) 

Question: 

 Ryan White CARE Act Feedback Meetings and Alternatives to Principles Has the 

Administration considered any alternative proposals? For example, I understand that the 

National Alliance of State and Territorial AIDS Directors, or NASTAD – an organization 

that represents State health department HIV/AIDS program directors – has developed 

alternative recommendations for a reauthorized CARE Act. In addition, I understand that 

a Ryan White Legislative Group has been established to offer alternative solutions to 

reauthorization issues. Has the Administration considered alternative proposals to 

address the need for enhanced resources and resolve variations in access to care? 

Answer: 

 The Administration began work on CARE Act reauthorization in January, 2003. 

Since then, there have been many opportunities provided by the Administration for 

HIV/AIDS organizations, persons affected by HIV/AIDS, and the public to offer 

comments and proposals on the reauthorization of the CARE Act. The Administration 

has had discussions with key constituent national groups including National Alliance of 

State and Territorial AIDS Directors (NASTAD) and Communities Advocating 

Emergency AIDS Relief (CAEAR) to hear their views and alternative proposals on 

changes to the CARE Act. In addition, both the CDC/HRSA Advisory Committee on 

HIV and STD Prevention and Treatment (CHAC) and the Presidential Advisory Council 

on HIV/AIDS (PACHA) developed reauthorization proposals resulting from public 

meetings (which were attended by hundreds of people representing themselves and many 

organizations) and other opportunities to hear constituency groups’ views and proposals 

on the CARE Act reauthorization. Both the CHAC recommendations and the PACHA 

resolution included, among other proposals, better targeting of CARE Act resources to 

follow the epidemic in order to promote equity in the allocation of CARE Act resources. 
119

8.) 

Question: 

 Restructuring the Ryan White CARE Act While it does not appear to be among the 

Administration’s principles, I have heard proposals that call for drastic modifications to 

the structure of the CARE Act, including eliminating or collapsing titles. Is it the 

Administration’s intent to change the basic structure of the CARE Act in an extreme 

manner, such as eliminating or collapsing titles? 

Answer: 

 No, the intent of the Administration is not to collapse or eliminate the CARE Act 

Titles or the programs funded under the various Parts and Titles of the CARE Act 

Irritable Bowel Syndrome (IBS) 

1). 

Question: 

 Secretary Leavitt, I hold great interest in the National Institute of Diabetes and 

Digestive and Kidney Diseases’ (NIDDK) research portfolio on Irritable Bowel 

Syndrome or IBS. Can you provide the Committee with the level of funding that NIDDK 

has dedicated to gastrointestinal functional and motility disorders over the last five years? 

Answer: 

 The NIDDK supports a broad-based research approach to IBS that includes 

fundamental research in gastrointestinal motility, immunology, and cell biology, and 

clinical research in patients with IBS. This research is aimed at understanding the 

development of the pathways that control motility mechanisms in the gut; research on the 

integration of pain, motility and behavioral neural circuits, and the relationship of gut 

inflammation to these pathways; translational research aimed at moving discoveries in 

animal models into studies in humans; and clinical studies. NIDDK funding for IBS 

research for fiscal years 2001 through 2005 was: FY 2001, $9.3 million; FY 2002, $10.8 

million; FY 2003, $16.5 million; FY 2004, $16.9 million; and FY 2005, $19.4 million. 
120

The Honorable Charles Gonzales

1.) 

Question: 

 Secretary Leavitt, as you know under current law, there is a problem with the 

Medicare physician payment system. According to the American Medical Association, 

Medicare payments to doctors are slated to be cut every year for the foreseeable future. 

Beginning in 2007 doctors will see a cut of 4.6 percent in their Medicare payments, and a 

total cut of 34% over the next nine years, about $26,000 per physician per year. First, I 

would note that the President’s Budget includes no proposal to address this matter. There 

is language indicating you may wish to address this issue, but I would like to know – is it 

correct to state that at this time the Administration has no proposal, legislative or 

otherwise, to fix physician payments? 

Answer: 

 The Deficit Reduction Act (DRA) of 2005 eliminated the negative physician update 

that would otherwise have taken place for 2006. In 2006, the physician community is 

developing quality measures that would cover a broad group of physician specialties and 

a wide range of clinical areas for physicians to begin reporting in 2007. We are working 

closely with the physician community to develop these evidence-based quality measures. 

During 2006, we are conducting a physician voluntary reporting program to allow 

physicians to report some existing quality measures and to allow us to test administrative 

mechanisms for reporting such measures. We are also examining the administrative 

issues that would be involved with alternative mechanisms to reward physicians who 

report information on quality measures. As the year transpires, we will assess progress in 

the development of performance measures for physicians, as well as mechanisms for the 

reporting of measures in 2007. This will provide physicians with the opportunity to 

report measures first, leading to payment for reporting and performance on such 

measures in the future. We would be happy to work with you and your colleagues on the 

physician update issue for 2007 and future years. 

2.) 

Question: 

 This is not a new and unexpected problem. Congress has had to make adjustments 

to Medicare physician payments over the past number of years since President Bush has 

been in office. The Medicare Payment Advisory Commission (MedPAC) first called for 

a new formula in March of 2001- two months after the beginning of President Bush’s 

first term. How is it that after this many years of having a problem that is clearly 

identified and has been discussed in numerous hearings, letters to the Administration, 

public forums and other venues, the Administration still has absolutely no proposed 

solution? Can you tell me when the Administration will have a proposal to address the 

physician payment cuts in Medicare 

Answer: 

 The President’s Budget indicates support for linking quality to Medicare payment in 

a cost neutral manner. Given concerns about the overall financing of the Medicare 

program, we do not believe that providing additional aggregate funding to finance 

incentive payments is either supportable or necessary. On the other hand, we believe that 

savings from reducing care that is unnecessary or otherwise inappropriate affords 

opportunities to fund incentive payments. We believe we should examine possibilities of 

improving care coordination and using some of the savings generated in one payment 

system to fund incentives in another, as long as these reforms do not provide 

inappropriate incentives not to furnish necessary care. 
121

 The foundation of effective pay-for-performance initiatives is collaboration with 

providers and other stakeholders to ensure that valid quality and efficiency measures are 

used, that providers are not being pulled in conflicting directions, and that providers have 

support for achieving actual quality improvement. Consequently, to develop and 

implement these initiatives, we are collaborating with a wide range of health care 

providers, other public agencies, and private organizations who share our goal of 

improving quality and avoiding unnecessary health care costs. CMS is working with the 

provider community to identify and test budget-neutral incentives that will stimulate 

Medicare providers to improve performance on quality and efficiency measures. 

3.) 

Question: 

 Is this current reimbursement formula for physicians a fair and realistic 

reimbursement formula for doctors 

Answer: 

 The current physician payment system focuses on payment for individual services, 

but does not provide incentives for physicians to take into account all of the services 

furnished to beneficiaries to treat an episode of care, or furnished during a period of time 

to treat chronic disease. This often has the effect of directing more resources to 

delivering care that is not of the highest quality (for example, duplicative tests and 

services, as well as hospital admissions or visits to treat potentially avoidable 

complications). Conversely, providers who have good ideas and want to take action to 

improve quality of care find that Medicare’s physician payment system does not provide 

them with the resources or the flexibility needed to do so. As a result, providers are 

unable to invest in activities that, properly implemented, have the potential to improve 

quality and avoid unnecessary medical costs. 

 Linking a portion of Medicare payments to valid measures of quality and effective 

use of resources would give providers more direct incentives and financial support to 

implement the innovative ideas and approaches that result in improvements in the value 

of care that our beneficiaries receive. CMS supports provider payment reforms that 

would encourage quality and efficiency, and discourage increased complications and 

costs. 

4.) 

Question: 

 Secretary Leavitt, I am deeply concerned about the potential impact of proposed 

reductions in federal Medicaid spending on children and on children’s hospitals, since 

Medicaid pays for the health care of one in four children and nearly half of the patient 

care in children’s hospitals. CHRISTUS Santa Rosa Children’s Hospital in my district is 

the largest provider of Medicaid services in the state of Texas—more than 70% of all of 

its patients are covered by Medicaid. Additionally, Texas has the fastest growing child 

population in the nation. Please explain to me what the administration proposes to do to 

make sure that the $60 billion reduction in Medicaid spending won’t jeopardize the 

ability of children to receive the care they need, particularly the sickest children in the 

country who rely on children’s hospitals. 

Answer: 

 Last year when you addressed this question to me I reported that the President’s FY 

2006 Budget had the goal of cutting the budget deficit in half by 2009. Some of the 

savings to achieve that goal were proposed to come out of the budget for Medicaid and 

SCHIP-- in fact, the budget proposed $60 billion in savings over ten years for Medicaid 
122

and SCHIP. The net savings for these two programs, however, was $44.5 billion because 

the budget also included $16.5 billion in proposed new spending. 

 The President’s commitment to Medicaid reform proposals culminated in the Deficit 

Reduction Act of 2005 (DRA) which helps to achieve a transformation of Medicaid from 

a 1960s welfare program to a 21st century, innovative and adaptable provider of health 

care services for a broad spectrum of Americans. The President’s FY 2007 builds on the 

success of the DRA by including both legislative and administrative proposals. Taken 

together these modest changes would save approximately $13 billion over five years. 

 With regard to specific services for children and other vulnerable populations, the 

DRA provides that States can choose to implement benefit flexibilities authorized by a 

new Section 1937 of the Social Security Act. However, the statute prohibits states from 

requiring certain groups of individuals to enroll in benchmark coverage, such as pregnant 

women, certain low-income parents, adults and children with disabilities, dual eligibles, 

and certain other aged and disabled individuals in need of long term care or adults and 

children with special needs. 

 Non-disabled children can be offered the benchmark or benchmark equivalent 

coverage specified in Section 1937, and for those children under 19, states will be 

required to provide wrap-around coverage consisting of EPSDT services if the 

benchmark and/or benchmark equivalent package does not offer these services. CMS 

policy is that EPSDT services will remain intact for children, and CMS will not approve 

any State plan amendment submitted under the new section 1937 that does not include 

the provision of EPSDT services for children under 19 as defined in section 1905(r) of 

the Social Security Act. 

5.) 

Question: 

 Secretary Leavitt, you have identified targeted case management as one area where 

states should cut their Medicaid expenditures, yet targeted case management is an 

extremely valuable service for many children. For example, a child in foster care who 

has asthma, depression from suffering abuse and learning disabilities may need his 

caseworker to coordinate treatment with his teachers, doctors, therapists, foster parents 

and birth family. This coordination is not waste, fraud or abuse, and in many states this 

targeted case management provides a critical service and a significant portion of the 

funds to serve these vulnerable special needs children. In the face of billions of dollars 

worth of additional tax cuts for millionaires, why are you suggesting cutting this support 

out from under these children? 

Answer: 

 The Deficit Reduction Act of 2005 (DRA) included a provision to clarify what is 

reimbursable under the Medicaid case management benefit and the targeted case 

management (TCM) benefit. The Centers for Medicare and Medicaid Services (CMS) is 

currently drafting regulations to implement section 6052 of the DRA. 

 The FY 2007 President’s Budget proposes to reimburse case management at the 

administrative matching rate of 50 percent. This legislative proposal was in the FY 2006 

Budget and the Administration is proposing it again because there is evidence to indicate 

that states have attempted to shift costs associated with other social service programs to 

Medicaid. There are instances where the Medicaid program is being charged improperly 

for case management services when another program should maintain responsibility for 

payment. 

 Under the proposal, the match for case management will be the same as it is for an 

administrative activity. It does not eliminate federal financial participation (FFP) for case 

management services, nor does it affect Medicaid eligibility for those services or any 

other Medicaid services. In addition, the proposal does not affect the amount of 
123

reimbursement that states will receive for Medicaid services to which an individual may 

be referred by a case manager. 

6.) 

Question: 

 Secretary Leavitt, the budget proposes investing an additional $1 billion in outreach 

efforts to enroll eligible children in CHIP. Yet the budget also proposes freezing SCHIP 

funding at next year’s level. Given that health care costs continue to rise and that many 

states have already cut back on services, reduced eligibility or increased co-pays because 

they have the funds to service children at current levels, isn’t it disingenuous at best to 

spend money on enrollment without adding funds to actually serve the children enrolled? 

Answer: 

 The FY 2007 President’s budget proposal does not “freeze” SCHIP funding; it 

assumes SCHIP will continue at its current level. We look forward to working with 

Congress on the reauthorization of SCHIP. 

 Approximately $9.5 billion in federal SCHIP allotments is available to states for FY 

2006, not including the FY 2003 redistribution ($171.6 million) or the FY 2006 

additional allotment ($280 million) to eliminate funding shortfalls (as appropriated by the 

Deficit Reduction Act of 2005). 

 In addition, there are sufficient funds in SCHIP to meet current state needs, as well 

as to cover additional children that would be enrolled as a result of the comprehensive 

outreach efforts that the President has proposed through the “Cover the Kids” campaign. 

Therefore, if the President’s redistribution and outreach proposals are passed, we estimate 

that there will be plenty of funding in the system to cover these children. 

7.) 

Question: 

 Secretary Leavitt, the passage of the Medicare Modernization Act last Congress 

created a new program, Part D, to provide prescription drug benefits for seniors. In 

regards to Part D benefits and Preferred Drug lists, what criteria are going to be used to 

determine the drugs available for Medicare beneficiaries? Will the limited Oregon-style 

evidence-based medicine approach be utilized or will the more complete EBM system, as 

originally described, be the basis for medication reviews? How limited will the drug 

formularies be and how will inclusions or exclusions be determined? 

Answer: 

 The MMA required that CMS develop, in consultation with the United States 

Pharmacopoeia (USP), model formulary guidelines for Part D plans. The USP guidelines 

identify categories and classes of drugs, and plan formularies must include at least 2 

drugs per category and class outlined by the USP. For six categories of drugs of critical 

concern -- antidepressants, antipsychotics, anticonvulsants, anticancer drugs, 

immunosuppressants, and drugs for HIV/AIDS -- CMS requires plan formularies to cover 

“all or substantially all” available drugs. 

 CMS reviews all Part D plan formularies to ensure that beneficiaries have access to 

a broad range of medically appropriate drugs to treat all disease states. In addition, a plan 

formulary design must not discriminate or substantially discourage enrollment of certain 

beneficiaries. CMS created rigorous formulary standards that rely on existing best 

practices in the industry to ensure beneficiaries have access to medically necessary drugs, 

while offering flexibility for plans to offer benefits in the most cost efficient manner. 

Each formulary is reviewed by CMS pursuant to 13 different criteria: 

1. Review of USP categories and classes (USP Model Guidelines) 
124

2. Comparison with American Hospital Formulary System categories and classes 

3. Two drugs per category and class 

4. Review for USP formulary key drug types 

5. Review of tier placement for all drugs 

6. Review of widely accepted treatment guidelines 

7. Review for 6 therapeutic categories or pharmacologic classes requiring 

uninterrupted access (“all or substantially all” requirement) 

8. Review for common drugs used by Medicare population 

9. Quantity limit review 

10. Prior authorization review 

11. Step therapy review 

12. Insulin supplies and vaccine review 

13. Long-term Care accessibility review 

 Additionally, CMS has provided detailed guidance to plans regarding the process for 

making formulary changes within a plan year. 

8.) 

Question: 

 Secretary Leavitt, how does the FY 2006 Health care budget address 

reimbursements for acute care health services that are mandated for hospitals to provide? 

Answer: 

 The Administration recognizes and supports the important part hospitals play in our 

health care delivery system through the federal health care programs that we administer. 

I believe that the mandated services you are referring to in your question relate to those 

required under the Emergency Medical Treatment and Labor Act (EMTALA). In 1986, 

Congress enacted EMTALA to ensure public access to emergency services regardless of 

a patient’s ability to pay. The statute imposes specific obligations on hospitals 

participating in the Medicare program that offer emergency services, which include 

providing a medical screening examination when a request is made for examination or 

treatment for an emergency medical condition, including active labor, regardless of an 

individual's ability to pay. Hospitals are then required to provide stabilizing treatment for 

patients with emergency medical conditions. The provisions of EMTALA apply to all 

individuals (not just Medicare beneficiaries) who attempt to gain access to a hospital for 

emergency care. 

 Although the President’s Budget does not specifically address reimbursements for 

acute care health services that hospitals are mandated to provide under EMTALA, the 

Centers for Medicare & Medicaid Services is currently implementing a program that 

reimburses certain health care providers for these services. Section 1011 of the Medicare 

Modernization Act (MMA) set aside $250 million a year for fiscal years 2005 through 

2008 to assist hospitals, physicians, ambulance providers, and Indian Health Service and 

Tribal organizations to recoup a portion of their costs associated with providing 

emergency services required by EMTALA. Individuals for which eligible services may 

be reimbursed include qualified undocumented immigrants who are uninsured or cannot 

afford emergency care. Two-thirds ($167 million) is allotted to all 50 States and the 

District of Columbia, based upon their relative percentages of the total number of 

undocumented immigrants. The remaining one-third ($83 million) is allotted to the six 

States with the largest number of undocumented immigrant apprehensions. The first and 

second rounds of payments to providers under Section 1011 has been completed and was 

made for services rendered during the third and fourth quarters of FY 2005. 
125

9.) 

Question: 

 The President’s budget calls for $169 million for Health Information Technology 

(HIT), an increase of $58 million over FY2006. Some may consider this a significant 

increase. I don’t think it is enough. Any practicing physician will tell you about the 

significant inefficiency in our current system of health care with respect to medical 

records/health information. I think tremendous gains in better care and cost savings can 

be achieved with better health information infrastructure. And sooner is better than later. 

How is the $169 million for HIT going to be used in FY2006? Is this money going 

toward demonstration programs and what is the process by which these demonstration 

programs are chosen? 

Answer: 

 The FY 2007 budget request includes a total of $116 million for the Office of the 

National Coordinator for Health Information Technology (ONC). In addition to funds 

requested within ONC, the FY 2007 request includes $50 million in the Agency for 

Healthcare Research Quality to advance the use of health IT to enhance patient safety. 

There is also $4 million in the Office of the Assistant Secretary for Planning and 

Evaluation for independent evaluations of EHR adoption and economic factors 

influencing health IT implementations in the health sector. 

 ONC will continue to build upon foundational initiatives underway through its 

contractors to develop the long-term capacity to support widespread adoption of 

interoperable health IT. Core activities include 

• Developing and harmonizing standards that are required for health information 

and data portability, which will include a process to maintain and update these 

standards over time; 

• Continuing the development of a certification process for health IT, which will 

include refinements to existing certification criteria for inpatient and 

ambulatory EHRs as well as new criteria related to the NHIN architecture. 

• Continuing the development of production-quality prototypes for Nationwide 

Health Information Networks (NHINs) which will enable secure exchange of 

electronic health records (EHR) and other health data; 

• Developing personal health record architectures that will be integrated with the 

NHIN architecture, which will allow personal health information data to be 

controlled by the consumer and not just by clinicians and providers; 

• Evaluating variations in the State laws and organization-level business policies 

around privacy and security practices, including variations in implementations 

of HIPAA privacy and security requirements. Lessons will be incorporated 

into the NHIN prototypes. 
126

The Honorable Edward J. Markey 

Medicare Part D

 Looking at the President’s Budget, I was surprised that the President has not 

proposed any changes to his Medicare Prescription Drug Program. Clearly we have seen 

a chaotic implementation of a confusing and overly complex program. Seniors have been 

calling for an easier solution and democrats have proposed providing seniors with the 

option of comprehensive plan that is run by Medicare which offers low cost drugs that 

have been negotiated by the Secretary 

1.) 

Question: 

 The President says that he wants to offer seniors choices. Would you support 

offering seniors the opportunity to choose a plan that is administered by Medicare? 

Answer: 

 We are very pleased that following the Part D prescription drug benefit’s initial 

enrollment period, more than 90 percent of people with Medicare are now receiving 

coverage for prescription drugs. Surveys by independent analysts have shown that a 

majority of enrolled beneficiaries are satisfied with their coverage and are saving money 

on prescription drugs. Ongoing analysis conducted by CMS continues to show that the 

Medicare prescription drug program is providing significant discounts on prescription 

drugs, with available savings remaining stable over time. Cost estimates of the Part D 

program are much lower than expected, in part because of aggressive price negotiation. 

Lower than expected bids, which were a direct result of price negotiations, have in turn 

resulted in lower costs for both beneficiaries (in the form of lower premiums and better 

benefits) and taxpayers. The Medicare prescription drug benefit experience thus far 

demonstrates that government price negotiation is unnecessary because competition is 

working. 

2.) 

Question: 

 When seniors encounter problem getting their prescriptions filled and they have to 

call their plan. They are usually either put on hold (literally for hours), are hung up on or 

are not able to speak with an actual person in customer relations to help resolve their 

issue. 1-800-MEDICARE has gotten faster, but it can’t answer many specific questions 

and often tells beneficiaries that they have to call their plans. Has CMS or HHS done 

anything to force plans to reduce the plans' wait times and become more user friendly? 

Answer: 

 We are very serious about overseeing plan call centers and enforcing their adherence 

to the requirement that beneficiaries get the information they need. Medicare 

beneficiaries should be able to count on a high level of customer service from their 

plans. For this reason, CMS has implemented a broad set of requirements for plan call 

centers that reflect the services they should be expected to provide reliably. CMS has 

been tracking actual plan performance and complaints, and we have been taking 

enforcement actions when necessary. CMS also has publicly released comparative 

information on plan call center performance and complaint rates to assist beneficiaries in 

identifying plans with a high level of customer service. 
127

3.) 

Question: 

 On May 16th will seniors be able to go to the pharmacy and fill their prescriptions 

without hassle, or will millions be turned away once again while the states are left to pick 

up the tab? What has been done to ensure that the problems in late December and early 

January won’t be repeated on May 15th when there will be another wave of enrollment? 

Answer: 

 CMS has been reaching out to beneficiaries and educating our partner network about 

the importance of enrolling in the first half of the month to maximize chances of a 

smooth transition to new Part D coverage. We also have taken steps to improve the 

regularity and consistency of data exchanges between plans and CMS to increase the 

likelihood that pharmacies will have enrollment and cost-sharing information available to 

them when new enrollees first try to fill a prescription using their new coverage. These 

efforts have resulted in significant improvements.

Public Health Service Evaluation Funding Questions:

 It is my understanding that after appropriations have been made, the Secretary 

reduces funding for some programs and moves that money to other programs or even 

other agencies at HHS using the PHS Evaluation funding system. 

1.) 

Question: 

 What is the purpose of PHS Evaluation funding? 

Answer: 

 PHS Evaluation funding supports critical evaluation activities throughout HHS. 

These evaluations, and the data collection and analysis that support them, improve 

program performance by ensuring that timely and accurate information is available to 

support funding and management decisions. PHS Evaluation funds finance the entire 

budget of the Agency for Healthcare Research and Quality, major data collection 

activities in the Centers for Disease Control and Prevention and the Substance Abuse and 

Mental Health Services Administration, and other evaluation and research activities 

across the Department. 

2.) 

Question: 

 What is the legal authority for PHS Evaluation funding? 

Answer: 

 The use of PHS Evaluation funding is authorized by section 241 of the Public Health 

Service Act. The annual Labor, Health and Human Services, and Education 

Appropriation Acts specify the amount of funding that may be transferred from one 

program to another (2.4% for FY 2006 – see Section 207, General Provisions of 

P.L. 109-149), and specify, in each agencies’ annual appropriations language, the 

amounts of PHS Evaluation funding to be received by specific HHS programs. 

3.) 

Question: 

 How much money was been moved within HHS though this process in the last fiscal 

year? How much over the last five years? How much do you anticipate moving in FY 

2007? 
128

Answer: 

 In FY 2005, the last fiscal year for which final data is available, $827.1 million of 

PHS Evaluation Funds were utilized by HHS agencies. For the five years between 

FY 2001 and FY 2005, a cumulative total of $2,911.2 million of PHS Evaluation Funds 

were utilized. In FY 2007, the President’s Budget requests that $845.3 million of PHS 

Evaluation Funds be used. 

4.) 

Question: 

 What programs within each agency are sources of PHS Evaluation funding 

and which programs within each agency are the “recipients” of PHS Evaluation funding? 

Answer: 

 As for the sources of PHS Evaluation funding, Section 241 of the Public Health 

Service Act allows the Secretary of Health and Human Services to use up to one percent 

of funds appropriated for all programs authorized under the Act for evaluation of such 

programs. The actual amount to be transferred is also specified in the annual 

appropriations bills. The programs of the Food and Drug Administration and the Indian 

Health Service, although part of the Public Health Service, are not authorized by this Act 

and, therefore, do not participate in the PHS Evaluation program. Some of the programs 

in the other PHS agencies are not financed by the Public Health Service Act (e.g., the 

Maternal and Child Health Block Grant in the Health Resources and Services 

Administration). Likewise, these programs also do not participate in the PHS Evaluation 

program 

 Recipient programs, as directed by Congress through the annual Labor-HHS 

Appropriations Act, include: the entire Agency for Healthcare Research and Quality; 

numerous health surveys and occupational disease and workplace safety activities within 

the Centers for Disease Control and Prevention; health surveys within the Substance 

Abuse and Mental Health Services Administration; research and evaluation conducted by 

the Assistant Secretary for Planning and Evaluation in the Office of the Secretary; 

activities of the Office of the National Coordinator for Health Care Information 

Technology; Ryan White Special Projects of National Significance within the Health 

Resources and Services Administration; research and evaluation activities within the 

Administration for Children and Families; the National Library of Medicine’s National 

Information Center on Health Services Research and Health Care Technology in the 

National Institutes of Health; other research and evaluation activities in the Office of 

Public Health and Science and the Office of Public Health Emergency Preparedness in 

the Office of the Secretary; and other agency-specific efforts to evaluate the effectiveness 

of individual programs. 

5.) 

Question: 

 At what point in the budget process are decisions about PHS Evaluation funding 

made? 

Answer: 

 Decisions about usage of PHS evaluation funds are made at the same time in the 

budget process as decisions about the usage of appropriated funds. The President’s 

Budget and HHS’s Appropriation Acts specifies how PHS evaluation funds are to be 

used. 
129

6.) 

Question: 

 What is the process by which the donor programs and recipient programs 

are determined and what the process for determining the amounts that are either given or 

received for each program? 

Answer: 

 Recipient programs are identified in HHS’s budget submission to Congress and are 

ultimately chosen by Congress when it passes HHS appropriation bills. Donor programs 

are billed proportionately to the amount of budget authority each has for programs 

authorized by the PHS Act (not counting exclusions). 

7.) 

Question: 

 Is comprehensive, understandable information about PHS Evaluation funding 

available any public form? If so, where? 

Answer: 

 As required by law, HHS submits an annual report to the Labor-HHS 

Appropriations Subcommittees. This report shows the amount each Agency receives and 

the amount each agency donates. 

8.) 

Question: 

 Is comprehensive, understandable information about the various programs affected 

by PHS Evaluation funding compiled in any public form? If so, where? 

Answer: 

 The annual report to Congress includes information on the amounts that each agency 

donates. Some agencies are routinely requested by the Appropriations Subcommittees 

for additional line item detail in Questions for the Record following budget hearings. 

9.) 

Question: 

 If PHS Evaluation funding were reduced or eliminated, what would the Secretary do 

with the money? If that is not known, what process would be used to make those 

decisions? 

Answer: 

 In FY 2005, each donor agency contributed 2.4% of amounts appropriated for 

eligible programs under the PHS Act authorization and not otherwise excluded. If less 

PHS Evaluation funding were allocated by Congress, then the contribution from these 

programs would be less than 2.4%, more money would stay where it was originally 

appropriated, and less would be transferred to places where it is used for evaluation 

activities and the support of other ongoing programs, as currently directed by Congress. 

Avian Flu /pandemic

1.) 

Question: 

 With Katrina, we had a situation where because everyone was in charge, no one was 

in charge. I am afraid that we are setting ourselves up for another case of this with our 

plans for pandemic flu. Who is ultimately in charge of pandemic preparations? Are you 
130

in charge, is Dr. Gerberding in charge, is Secretary Chertoff in charge or does the buck 

stop with someone else? 

Answer: 

 The Department of Health and Human Services serves as the Federal Government’s 

primary agency for the public health and medical preparation and planning for and 

response to a pandemic. The Secretary of Health and Human Services will lead Federal 

health and medical response efforts, will serve as the primary Federal spokesperson for 

pandemic health issues, and coordinate the actions of other departments and agencies in 

the overall public health and medical emergency response efforts. The Secretary of 

Homeland Security will provide overall incident management for the Federal response, 

and coordinate with HHS and other Federal, State, and tribal agencies in providing nonmedical support. The Secretary of Homeland Security will also gather and fuse 

information in order to provide a “common operational picture” for the Federal 

Government. 

 The National Response Plan (NRP) stipulates mechanisms for coordination of the 

Federal response, but sustaining these mechanisms for several months to over a year will 

present unique challenges. While day-to-day situational monitoring would likely occur 

through a central operations center, critical decision-making would be accomplished 

through an interagency body comprised of senior decision makers from across the 

Government. This would occur through a mechanism such as a joint interagency task 

force. These and other considerations applicable to response to a pandemic will be 

incorporated in the NRP review process and inform recommendations on revisions and 

improvements to the NRP and associated annexes. 

 Irrespective of the mechanism used for interagency coordination, and pursuant to the 

NRP, policy issues that cannot be resolved at the department level will be addressed 

through the Homeland Security Council/National Security Council-led policy 

coordination process. 

2.) 

Question: 

 A special interest legal liability exemption rider was inserted into Department of 

Defense Appropriations Conference Report at the last minute. This rider provides 

virtually unlimited liability protection to the drug industry and no money for 

compensation to victims if you make a declaration that a qualified pandemic or epidemic 

product deserves this liability protection. I am concerned that the term “epidemic 

product” is overly broad and I would like to get your opinion on what is covered by this 

term and how you plan to use this power to exempt the drug industry from liability. 

Answer: 

 We are very pleased that Congress has provided limited liability protections in this 

area. As you know, we have proposed a dramatic plan to ensure the nation’s 

preparedness against a possible pandemic influenza that would have devastating effects. 

 One of the key barriers to our preparedness is the need for a strong and robust 

domestic vaccine manufacturing infrastructure that has the capacity to quickly ramp up 

production to provide vaccines for 300 million Americans. Since 1979, the number of 

U.S. licensed vaccine manufacturers has declined from 26 to 8. And for many vaccines, 

there is no longer a US-based manufacturer. 

 One reason for this, along with an uncertain market and other factors, is the 

continuous threat of liability facing vaccine manufacturers. As we developed our plans 

for pandemic flu, the vaccine industry made clear to us that there were three barriers that 

had to be addressed: 

1. The threat of unwarranted liability 
131

2. The lack of a guaranteed purchaser 

3. The importance of streamlining regulatory barriers. 

 With Congress’ help, we are now able to address each of these barriers. We are 

pleased that Congress has acted to provide limited liability protections for vaccine 

manufacturers and providers, with an exception to allow suits to proceed against 

companies who act with willful misconduct. We believe this strikes an appropriate 

balance of removing the threat of frivolous and unwarranted tort suits, while still 

retaining appropriate access to court remedies. With respect to our pandemic influenza 

vaccine contracts, we do plan to make use of the authorities afforded under the PREP 

Act. 

 It seems clear to me that Congress intended to focus this Act on products to meet the 

threats of pandemic flu and bioterrorism. While it is premature to discuss future 

hypothetical situations, I assure you we will strive to use this authority in a manner 

consistent with good policy and Congressional intent. We are also pleased that Congress 

has acted to put in place a structure to ensure that Americans injured by a vaccine to treat 

or prevent pandemic flu are appropriately compensated.

3.) 

Question: 

 Do you think it would be appropriate to use this power to protect Merck who did not 

follow up on critical studies that indicated that Vioxx was linked to heart attacks from 

liability claims? Yes or no? 

Answer: 

 We are very pleased that Congress has provided limited liability protections in this 

area. As you know, we have proposed a dramatic plan to ensure the nation’s 

preparedness against a possible pandemic influenza that would have devastating effects. 

 One of the key barriers to our preparedness is the need for a strong and robust 

domestic vaccine manufacturing infrastructure that has the capacity to quickly ramp up 

production to provide vaccines for 300 million Americans. Since 1979, the number of 

U.S. licensed vaccine manufacturers has declined from 26 to 8. And for many vaccines, 

there is no longer a US-based manufacturer. 

 One reason for this, along with an uncertain market and other factors, is the 

continuous threat of liability facing vaccine manufacturers. As we developed our plans 

for pandemic flu, the vaccine industry made clear to us that there were three barriers that 

had to be addressed: 

1. The threat of unwarranted liability 

2. The lack of a guaranteed purchaser 

3. The importance of streamlining regulatory barriers. 

 With Congress’ help, we are now able to address each of these barriers. We are 

pleased that Congress has acted to provide limited liability protections for vaccine 

manufacturers and providers, with an exception to allow suits to proceed against 

companies who act with willful misconduct. We believe this strikes an appropriate 

balance of removing the threat of frivolous and unwarranted tort suits, while still 

retaining appropriate access to court remedies. With respect to our pandemic influenza 

vaccine contracts, we do plan to make use of the authorities afforded under the PREP 

Act. 

 It seems clear to me that Congress intended to focus this Act on products to meet the 

threats of pandemic flu and bioterrorism. While it is premature to discuss future 

hypothetical situations, I assure you we will strive to use this authority in a manner 

consistent with good policy and Congressional intent. We are also pleased that Congress 
132

has acted to put in place a structure to ensure that Americans injured by a vaccine to treat 

or prevent pandemic flu are appropriately compensated. 

4.) 

Question: 

 Do you think it would be appropriate to use this power to protect GlaxoSmithKline 

who concealed information showing that their product Paxil increased the risk of 

suicidality in children from liability claims? Yes or no? 

Answer:

 We are very pleased that Congress has provided limited liability protections in this 

area. As you know, we have proposed a dramatic plan to ensure the nation’s 

preparedness against a possible pandemic influenza that would have devastating effects. 

 One of the key barriers to our preparedness is the need for a strong and robust 

domestic vaccine manufacturing infrastructure that has the capacity to quickly ramp up 

production to provide vaccines for 300 million Americans. Since 1979, the number of 

U.S. licensed vaccine manufacturers has declined from 26 to 8. And for many vaccines, 

there is no longer a US-based manufacturer. 

 One reason for this, along with an uncertain market and other factors, is the 

continuous threat of liability facing vaccine manufacturers. As we developed our plans 

for pandemic flu, the vaccine industry made clear to us that there were three barriers that 

had to be addressed: 

1. The threat of unwarranted liability 

2. The lack of a guaranteed purchaser 

3. The importance of streamlining regulatory barriers. 

 With Congress’ help, we are now able to address each of these barriers. We are 

pleased that Congress has acted to provide limited liability protections for vaccine 

manufacturers and providers, with an exception to allow suits to proceed against 

companies who act with willful misconduct. We believe this strikes an appropriate 

balance of removing the threat of frivolous and unwarranted tort suits, while still 

retaining appropriate access to court remedies. With respect to our pandemic influenza 

vaccine contracts, we do plan to make use of the authorities afforded under the PREP 

Act. 

 It seems clear to me that Congress intended to focus this Act on products to meet the 

threats of pandemic flu and bioterrorism. While it is premature to discuss future 

hypothetical situations, I assure you we will strive to use this authority in a manner 

consistent with good policy and Congressional intent. We are also pleased that Congress 

has acted to put in place a structure to ensure that Americans injured by a vaccine to treat 

or prevent pandemic flu are appropriately compensated. 

5.) 

Question: 

 What other “epidemic products” do you think it would be appropriate to protect 

from liability? 

Answer: 

 We are very pleased that Congress has provided limited liability protections in this 

area. As you know, we have proposed a dramatic plan to ensure the nation’s 

preparedness against a possible pandemic influenza that would have devastating effects. 

 One of the key barriers to our preparedness is the need for a strong and robust 

domestic vaccine manufacturing infrastructure that has the capacity to quickly ramp up 

production to provide vaccines for 300 million Americans. Since 1979, the number of 
133

U.S. licensed vaccine manufacturers has declined from 26 to 8. And for many vaccines, 

there is no longer a US-based manufacturer. 

 One reason for this, along with an uncertain market and other factors, is the 

continuous threat of liability facing vaccine manufacturers. As we developed our plans 

for pandemic flu, the vaccine industry made clear to us that there were three barriers that 

had to be addressed: 

4. The threat of unwarranted liability 

5. The lack of a guaranteed purchaser 

6. The importance of streamlining regulatory barriers. 

 With Congress’ help, we are now able to address each of these barriers. We are 

pleased that Congress has acted to provide limited liability protections for vaccine 

manufacturers and providers, with an exception to allow suits to proceed against 

companies who act with willful misconduct. We believe this strikes an appropriate 

balance of removing the threat of frivolous and unwarranted tort suits, while still 

retaining appropriate access to court remedies. With respect to our pandemic influenza 

vaccine contracts, we do plan to make use of the authorities afforded under the PREP 

Act. 

 It seems clear to me that Congress intended to focus this Act on products to meet the 

threats of pandemic flu and bioterrorism. While it is premature to discuss future 

hypothetical situations, I assure you we will strive to use this authority in a manner 

consistent with good policy and Congressional intent. We are also pleased that Congress 

has acted to put in place a structure to ensure that Americans injured by a vaccine to treat 

or prevent pandemic flu are appropriately compensated. 

6.) 

Question: 

 The legal liability exemption rider passed last year also created a compensation 

fund, but did not provide any money for it. Does the Administration plan to ask for funds 

to assure that compensation funds would be available for those who might be injured and 

no longer have recourse to the courts to seek compensation for damages? If there’s no 

funding, or not enough funding, in the compensation fund, are the drug companies still 

exempted out from legal liability for injuring the public? 

Answer: 

 We are very pleased that Congress has provided limited liability protections in this 

area. As you know, we have proposed a dramatic plan to ensure the nation’s 

preparedness against a possible pandemic influenza that would have devastating effects. 

 One of the key barriers to our preparedness is the need for a strong and robust 

domestic vaccine manufacturing infrastructure that has the capacity to quickly ramp up 

production to provide vaccines for 300 million Americans. Since 1979, the number of 

U.S. licensed vaccine manufacturers has declined from 26 to 8. And for many vaccines, 

there is no longer a US-based manufacturer. 

 One reason for this, along with an uncertain market and other factors, is the 

continuous threat of liability facing vaccine manufacturers. As we developed our plans 

for pandemic flu, the vaccine industry made clear to us that there were three barriers that 

had to be addressed: 

7. The threat of unwarranted liability 

8. The lack of a guaranteed purchaser 

9. The importance of streamlining regulatory barriers. 

 With Congress’ help, we are now able to address each of these barriers. We are 

pleased that Congress has acted to provide limited liability protections for vaccine 
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manufacturers and providers, with an exception to allow suits to proceed against 

companies who act with willful misconduct. We believe this strikes an appropriate 

balance of removing the threat of frivolous and unwarranted tort suits, while still 

retaining appropriate access to court remedies. With respect to our pandemic influenza 

vaccine contracts, we do plan to make use of the authorities afforded under the PREP 

Act. 

 It seems clear to me that Congress intended to focus this Act on products to meet the 

threats of pandemic flu and bioterrorism. While it is premature to discuss future 

hypothetical situations, I assure you we will strive to use this authority in a manner 

consistent with good policy and Congressional intent. We are also pleased that Congress 

has acted to put in place a structure to ensure that Americans injured by a vaccine to treat 

or prevent pandemic flu are appropriately compensated. 

7.) 

Question: 

 If only some states agree to accept the federal subsidy of 25 percent to stockpile 

antiviral drugs, how will the U.S. government ensure that all Americans are equally 

protected in a pandemic? Shouldn’t this be a federal responsibility, given all the other 

responsibilities that are left to the states? 

Answer: 

 Preparedness is a responsibility of all levels of government, communities, 

organizations, families, and individuals. The federal government is taking the primary 

lead in a variety of areas including expanding the nation’s vaccine production capacity, 

procuring and stockpiling antiviral drugs, engaging in international and domestic 

surveillance and monitoring, and stockpiling non-pharmacological interventions (masks, 

etc..). 

 Specifically, for antiviral drugs, the federal government is purchasing the majority 

of these drugs without any state contribution. For the remaining 31 million, HHS is 

providing equal opportunity and equal access for states to prepare. Whether states take 

advantage of this opportunity will depend on their assessment of their level of 

preparedness and readiness. 

 Finally, it is important to note that Tamiflu does not equal preparedness; rather, it is 

only one of a number of tools that could help reduce the human health effects of a 

pandemic. 

9.) 

Question 

 What is the status of contract negotiations for the antiviral stockpile? By what date 

does the Administration anticipate meeting its objective of 81 million courses of 

antivirals? 

Answer: 

 HHS has ordered 26 million treatment courses of influenza antivirals. By Decmber 

31, 2006, 24 million courses will have been delivered to the Strategic National Stockpile. 

By March 31, 2007, an additional 2 million courses will have been delivered. The 

pandemic influenza supplemental appropriation in December 2005 provided funding for 

the majority of these 26 million courses. 

 The supplemental appropriation also provides funding with which HHS will 

establish arrangements for State purchases of 31 million treatment courses. Under these 

arrangements with antiviral manufacturers, States will pay 75 percent of the purchase 

price and the Federal government will contribute 25 percent. HHS has asked States to 

notify us of their intent to purchase the subsidized antivirals. 
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HHS' purchase of 26 million courses and the additional State purchases of 31 million 

courses are factors that have led antiviral manufacturers to expand production capacity. 

 HHS' purchase of another 24 million courses for the SNS depends on the 

appropriation of additional funding. HHS anticipates that for an HHS purchase placed 

during the first quarter of Fiscal Year 2007, a substantial portion of the 24 million 

additional courses will be available for delivery by the end of 2007. HHS will purchase 

the balance of the antivirals for delivery in 2008. 

11.) 

Question 

 Containing a pandemic is a global undertaking. Producing vaccine for all Americans 

is a worthy goal; but assuring that all people around the world can be vaccinated may 

provide additional protection from a pandemic’s health, social, and economic impact. 

What would be the incremental cost were the U.S. to establish a larger goal (perhaps 

twice the planned 600 million doses) as part of a commitment by developed countries to 

contain a pandemic world wide? 

Answer: 

 The Administration has established a goal to enable the production of 600 million 

doses of vaccine within six months of the emergency of a pandemic influenza virus. 

Funding requested by the Administration to date supports the expansion of manufacturing 

capacity to produce the necessary levels of vaccination for the United States. At this time 

we are unable to estimate the cost of purchasing the vaccine toward the 600 million dose 

goal. The Administration will work with the Congress to provide the resources necessary 

to support the purchase these vaccines. 

 We appreciate the funding Congress provided for the first year of our Pandemic 

Influenza Plan. However, additional funding is needed in FY 2007 to build on the 

momentum we have achieved this year. The FY 2007 budget includes a $2.3 billion 

allowance for the second year of our plan. These funds will allow us to more fully 

engage vaccine manufacturers and move us closer to achieving our goal of purchasing 

enough antivirals to cover 25% of the population. 

 We have met with industry about how we will manage the FY 2006 funding, given 

that we did not receive the advanced appropriations for FY 2007 and FY 2008. This 

funding and the liability protection provided by Congress have been an excellent first 

step in engaging industry to develop needed technologies, build domestic vaccine surge 

capacity, and increase domestic antiviral production capacity. We look forward to 

working with you to achieve our goals in these areas. 

12.) 

Question 

 Will the additional egg-based and the new cell-based production capacity that the 

federal government is funding be available for interpandemic production of flu vaccine? 

Answer: 

 Our plan includes a number of investments for improving vaccine production 

capacity. These include expanding: 

•Egg-based domestic vaccine production: to acquire 20 million additional prepandemic vaccine treatment courses and develop surge capacity to produce 

approximately 60 million courses within 6 months of a pandemic outbreak; 

•Cell-based domestic vaccine production: to develop surge capacity to produce 

approximately 240 million courses within 6 months of pandemic outbreak by 2010; 

•The development of dose-stretching technologies to extend the vaccine supply; and 
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•The development of commercially-produced vaccine to protect against multiple 

strains. 

 Our FY 2006 supplemental request included $6.7 billion over three years to meet 

our pandemic preparedness goals. Congress provided funding for the first year of this 

plan. The FY 2007 budget seeks funding for the second year. 

Office of Generic Drugs Questions 

 Generic drugs save consumers billions of dollars each year and usually cost 60 to 90 

percent less than the brand-name version. It is my understanding that the office of generic 

drugs has a backlog of 975 generic drug applications. 

Question: 

 Why with a clear demand for more low cost generic drugs, this record backlog and 

increased number of applications has the President’s budget asked for essentially flat 

funding for the Office of Generic Drugs? 

Answer: 

 FDA understands that Congress and the public are concerned about the high cost of 

prescription drug products. Generic drugs play an important role in granting access to 

products that will benefit the health of consumers and the government. Prompt approval 

of generic drug product applications, also known as abbreviated new drug applications 

(ANDA), is imperative to making generic products available to American consumers at 

the earliest possible date. 

 FDA believes that making improvements in the process for the review of generic 

drug applications offers the best promise for reducing ANDA review time. With this 

goal in mind, in fiscal year (FY) 2005, FDA's Office of Generic Drugs (OGD), focused 

on streamlining efforts to improve the efficiency of the ANDA review process. OGD 

added chemistry and bioequivalence review teams and has taken steps to decrease the 

likelihood that applications will face multiple review cycles. OGD also instituted 

revisions to the review process such as early review of the drug master file as innovator 

patient and exclusivity periods come to an end, cluster reviews of multiple applications, 

and the early review of drug dissolution data. 

 In FY 2006, we will build on these process improvements. We have begun a major 

initiative to implement Question-based Review for assessment of chemistry, 

manufacturing, and controls data in ANDAs. This improvement builds on the Qualityby design and risk-based review initiatives of FDA's Center for Drug Evaluation and 

Research. This mechanism of assessment is consistent with the International Conference 

on Harmonization Common Technical Document and will enhance the quality of 

evaluation, accelerate the approval of generic drug applications, and reduce the need for 

supplemental applications for manufacturing changes. 

 FDA's OGD will continue to institute efficiencies in the review process to accelerate 

the review and approval of ANDAs. FDA also will continue to work very closely with 

the generic manufacturers and the generic drug trade association to educate the industry 

on how to submit applications that can be reviewed more efficiently and that take 

advantage of electronic efficiencies that speed application review. We also will work 

with new foreign firms entering the generic drug industry. The Agency recognizes that it 

will take time for these new firms to understand the requirements for generic drug 

products. In the long term, however, these efforts should shorten overall approval time 

and increase the number of ANDAs approved during the first cycle of review. In FY 

2006, FDA plans to spend $62.8 million relating to generic drugs and, specifically, $28.3 
137

million in OGD. For FY 2007, FDA has requested $64.6 million relating to generic 

drugs, $29 million specifically in OGD. 

1.) 

Question 

 Why at a time when we are trying to reduce costs in health care, are we slowing 

down the approval of generic drugs? 

Answer: 

 The approvals have continued to increase annually; FY 2003 – 284; FY 2004 – 320; 

FY 2005 – 361. Further, the average review time for approval has declined from 22.3 

months in 2000 to 19.5 months in 2005 and the median review time has declined from 

18.9 months in 2000 to 16.3 months in 2005.

2.) 

Question 

 What percent of the 975 generic drug applications that are in the backlog are for first 

in class generics? Backlog as of 1/1/06. 

Answer: 

 We currently do not distinguish “first generic” applications from other applications. 

We are presently committed to our long standing first-in, first-reviewed policy to review 

applications in turn. We also note that it is unclear as to what would constitute a “first in 

class generic” for this type of request. For example: 

1) Is a "first in class generic" only the first ANDA received referencing a brand 

product? 

2) Would "first in class generics" include all ANDAs received the first day that 

any ANDA was received for that reference product? 

3) Would a second generic for a particular reference become the “first in class 

generic” if there were deficiencies in the preceding “first” application? 

4) Would only the first ANDA for any drug in a therapeutic class be the “first in 

class generic”? 

5) Or would an ANDA qualify as a "first in class generic" if it were the first ANDA 

for a particular strength or dosage form, say, even if other ANDAs had already been 

received for different strengths or dosage forms of the reference product? 

3.) 

Question 

 How much additional funding would the office of generic drugs need to eliminate 

this backlog? 

Answer: 

 FDA’s present backlog is approximately 1000 applications. FDA is currently 

receiving approximately 800 applications per year and approving about 500. To reduce 

the current backlog by one third (about 330 applications) annually over three years, we 

would have to approve or tentatively approve 1130 applications per year. That number 

includes all of the projected 800 applications that we receive in the fiscal year plus 330 

more to reduce the current backlog. In order to approve or tentatively approve the 

approximately 90 applications per month, we would anticipate needing 70 FTEs for the 

first year and an additional 40 FTEs in each of the subsequent years, both to avoid having 

the backlog redevelop and to address anticipated increases in the number of ANDAs 
138

submitted. It would be necessary to have all of the FTEs on board at the beginning of 

each of the fiscal years. 

 We should also point out that the backlog, as traditionally defined, includes ANDAs 

cycling through the Office of Generic Drugs. For example, if an ANDA is submitted and 

reviewed, and there are significant problems with the ANDA, a deficiency letter is issued 

to the applicant. The applicant’s response, called an amendment, goes back into the 

review queue to await review. In some cases, the applicant does not respond in a timely 

manner due to their own resource limitation and priorities. These types of applications 

would also be considered to be part of the backlog. Because of this dependence on 

applicant responsiveness, it might not be possible to totally eliminate the backlog. 

4.) 

Question 

 On average how long does it take to conduct a first-in-class review of a generic 

drug? What is the longest amount of time it has ever taken? What is the shortest amount 

of time it has ever taken? (In both cases, please cite the name of the product and the date 

when it was approved.) 

Answer: 

 As noted above, we do not differentiate between first-in-class ANDA reviews and 

other ANDA reviews. Review times are highly dependant on the complexity of the 

product and the quality of the application and do not necessarily reflect the resources or 

efficiency of the Office of Generic Drugs. 

5.) 

Question 

 On average how long after a brand name loses its patent protection do generics enter 

the marketplace? What is the longest amount of time it has ever taken? What is the 

shortest amount of time it has ever taken? (In both cases, please cite the name of the 

product and the date when it was approved.) 

Answer: 

 The length of time for a generic drug to enter the marketplace depends on a number 

of factors, such as the applicant's commercial interest in the product, the ability of a 

generic manufacturer to produce the product, whether an application is ready for approval 

after the patent protections ends and if there is any exclusivity for the product (such as 

pediatric exclusivity). Even after approval, a firm may decide for its own business 

planning not to launch the product. FDA does not keep records in such a way that we 

would be able to readily discern the longest or shortest amount of time it has taken for a 

generic to reach the market after the brand name has lost its patent protections. 

6.) 

Question 

 It is my understanding that first-in-class applications must wait approximately 450 

days before its bioequivalence can be evaluated, approximately 360 days before it gets a 

clinical review and approximately 530 days before it is reviewed by a microbiologist. Are 

these time periods correct? These seem to be unacceptably long periods of time. What 

are the agencies goals with regard to reducing these backlogs? How much additional 

funding and how many additional staff would you need in order to reduce the time to less 

than 120 days for each phase? To less than 90 days? 
139

Answer: 

 As discussed above, the Office of Generic Drugs does not distinguish between firstin-class applications and other types of applications. It is true that the wait in the specific 

disciplines was at that level on the date the numbers were obtained. However, the 

applications do not all wait for that length of time. The chemistry reviews are the driving 

force of the review process and are reviewed according to the first-in, first-reviewed 

policy. When an application has been found satisfactory from the chemistry point of 

view (assessment of no deficiencies has been endorsed at the team level), this information 

is communicated to the other appropriate review disciplines (e.g., bioequivalence, 

microbiology). Those applications found acceptable from the chemistry standpoint are 

then moved to the top of the queue in the other disciplines so as not to hold up an action. 

Clear, high quality, complete applications are generally reviewed more easily and 

efficiently. 

 The overall goal for OGD is to meet the statutory timeframe and act on all 

applications within 180-days. The staffing needed to meet this goal and to reduce the 

backlog is discussed in the response to question 3. 

 To be able to have all review disciplines begin to review applications at 120 days, it 

could require an additional 30% increase over the figure provided in Question 3 (91, 52, 

and 52 FTEs in years 1, 2, and 3). To begin review in less than 90 days could require a 

50% increase (105, 60, and 50). Since we have not contemplated these time frames, 

these estimates are highly speculative. 

7.) 

Question 

 On average how long does it take to approve a generic drug? How does this compare 

to the length of time that is needed to approve a brand name drug? 

Answer: 

 During 2005 the average approval time for a generic drug was 19.5 months. The 

average time for NDA priority approvals is 10.1 months and the average time for other 

NDA approvals is 20.6 months. A comparison of these approval times would be 

misplaced because the goal dates for new drug applications are set by the user fee 

program and there are far fewer applications for new drug products. 

8.) 

Question 

 On average how much do drug companies make for each month that generics do not 

enter the market to compete with their brand name drug after it goes off patent? 

Answer: 

 One cannot derive a meaningful average because of the product -specific nature of 

the potential profit. Further, we generally do not have access to such information. 

Substance Abuse Cuts:

 Drug abuse is a huge problem in my district. Educators and local police are 

struggling with how to prevent the problem from spinning out of control. This problem is 

not limited to my district. In fact, 23 million Americans struggling with severe substance 

abuse nationwide. 

1.) 

Question 

 Do you agree that prevention and treatment of substance abuse is critical to ensuring 

that people are healthy and productive members of our society? 
140

Answer: 

 At the heart of the Administration’s success in reducing drug use is a change in 

perceptions about the acceptability of using illicit substances. Education programs and 

outreach activities, backed up by scientific studies, have worked to spread the word that 

illicit substance use can be harmful to a person’s health and well being, as well as a 

detriment to society as a whole. Effective education and prevention programs that focus 

on risk reduction and increasing resilience affect the perception of harm associated with 

drugs. 

 Despite all our attempts there are and will be some who will choose to use illicit 

drugs and many will become dependent. For some, early interventions will help them 

redirect their lives. For others, treatment will be necessary. The Administration has 

adopted a public health understanding of drug use and addiction and believes that drug 

use is a treatable disease. Like many other diseases, it is a relapsing condition that often 

requires not just the treatment itself but assistance in finding a job, a stable living 

environment and a social life that connects them to the society they are rejoining. 

Fortunately there are community-based programs, including faith-based programs, that 

are available to help. 

2.) 

Question 

 Then why does the President’s budget cut $72 million from the Substance Abuse 

and Mental Health Services Administration include cuts to treatment and prevention of 

substance abuse? Shouldn’t we be increasing our commitment to eradicating drug abuse? 

Answer: 

 While the $71.6 million reduction in the budget request for SAMHSA for FY 2007 

compared to its FY 2006 appropriation reflects a decrease of 2.25 percent, the actual 

decrease in funding for substance abuse is $35.9 million from FY 2006, which represents 

a decline of 1.5%. Despite this decrease, all continuation grants will be funded under the 

budget request, and the Administration is requesting funding for new grants under the 

Access to Recovery program that will offer choice to individuals in need of treatment, 

expand the array of services to include recovery and support services, and expand the 

array of providers to include new community-based programs, including faith-based 

programs. The Administration remains committed to prevention and treatment. 

3.) 

Question 

 Please provide a list of all of the HHS programs that provide funds to communities 

to help them address local issues of drug abuse. Please include programs that fund 

education, prevention and treatment. 

Answer: 

 The Administration has requested $2.3 billion for Fiscal Year 2007 to help prevent 

and treat drug use. These funds will be available through the following programs: 

Substance Abuse Prevention and Treatment Block Grant - FY 2007 request 

$1,758,591,000. This program distributes funds to States using a formula stipulated in 

statute to carry out substance abuse prevention and treatment activities in the State. 

Though there are some requirements that States must meet, States have tremendous 

flexibility in how they use the funds to address their State need. One requirement is that 

States must use at least 20 percent of their allotment for primary prevention. 
141

Discretionary Grant Portfolio - FY 2007 request for prevention is $180.6 million and for 

treatment $375.4 million. These funds are made available to public and non-profit 

private entities on a competitive basis to address drug use. The following are the primary 

discretionary grant programs: 

Access to Recovery - FY 2007 request $98 million. These grants are made to States to 

implement a voucher program for treatment that offers patients a clear and independent 

choice on treatment; expands the array of services, placing emphasis on recovery services 

that have been sorely needed in the treatment system; and expand the array of providers 

by including new community-based and faith-based programs to help drug users to 

recover. This program also brings accountability into the substance abuse treatment 

system. Fourteen States and one American Indian Tribe received the first cohort of these 

grants in FY 2004. FY 2007 funds would be used for the next cohort of Access to 

Recovery grants, giving the same States and all the other States a chance to compete for 

funds. 

Strategic Prevention Framework - FY 2007 request $95.4 million. These grants provide 

program support to States to implement a comprehensive substance abuse prevention 

system in the State that relies on community involvement. At the end of FY 2006, 40 

States and American Indian tribes will have received a grant. 

Drug Free Communities - FY 2007 request $80 million (funds for this program are 

appropriated to the Office of National Drug Control Policy). The program is intended to 

reduce substance abuse among youth; help community coalitions strengthen 

collaboration; enhance intergovernmental collaboration, cooperation and coordination; 

enable communities to conduct data-driven, research-based prevention planning, and 

provide communities with technical assistance, guidance, and financial support. 

Screening, Brief Interventions, Referral and Treatment - FY 2007 request $31.2 million. 

These grants expand and enhance State substance abuse treatment service systems by: 

• expanding the State’s continuum of care to include screening, brief 

intervention, referral, and brief treatment (SBIRT) in general medical and 

other community settings; 

• supporting clinically appropriate treatment services for nondependent substance 

users; 

• improving linkages among community agencies performing SBIRT and 

specialist substance abuse treatment agencies; and 

• identifying systems and policy changes to increase access to treatment in 

general and specialist settings. 

Targeted Capacity Expansion Grants - FY 2007 request $21 million. The purpose of 

these grants is to expand and/or enhance the community's ability to provide a 

comprehensive, integrated, and community-based response to a targeted, welldocumented substance abuse treatment capacity problem and/or improve the quality and 

intensity of services. For example, a community might seek a Targeted Capacity 

Expansion grant to add state-of-the-art treatment approaches or new services to address 

emerging trends or unmet needs. 

Grants to Benefit Homeless Individuals - FY 2007 request $34 million The purpose of 

these grants is to enable communities to expand and strengthen their treatment services 

for homeless individuals with substance abuse disorders, mental illness, or with cooccurring substance abuse disorders and mental illness. “Homeless” persons are those 
142

who lack a fixed, regular, adequate nighttime residence, including persons whose primary 

nighttime residence is: a supervised public or private shelter designed to provide 

temporary living accommodations; a time-limited/ nonpermanent transitional housing 

arrangement for individuals engaged in mental health and/or substance abuse treatment; 

or a public or private facility not designed for, or ordinarily used as, a regular sleeping 

accommodation. 

Children and Adolescent Programs - FY 2007 request $20.6 million. Key activities in 

this category include: State Adolescent Substance Abuse Treatment Coordination grants, 

which help build capacity in States to provide effective, accessible, and affordable 

substance abuse treatment for youth and their families; Child and Adolescent Mental 

Health and Substance Abuse State Infrastructure grants, which focus on children, 

adolescents, and youth in transition to adulthood with serious emotional disturbance, 

substance abuse disorder, or co-occurring disorders, and their families; and Family 

Centered Substance Abuse Treatment Grants for Adolescents and their Families, which 

provide services to adolescents and their families/primary caregivers using previously 

proven effective practices that are family centered and increase the likelihood of 

successful treatment and reintegration of the adolescents into their communities 

following the period of formalized treatment.. 

Criminal Justice - FY 2007 request $24 million There are several initiatives related to the 

criminal justice population. The Family and Juvenile Treatment Drug Courts (Drug 

Courts) Grant Program provides funds to be used by treatment providers and the courts to 

provide alcohol and drug treatment, wrap-around services supporting substance abuse 

treatment, assessment, case management, and program coordination to those in need of 

treatment drug court services. Grants are also available to expand and/or enhance 

substance abuse treatment and related reentry services in agencies that currently provide 

supervision of and services to sentenced juvenile and young adult offenders who are 

returning to the community from incarceration for criminal/juvenile offenses. Because 

reentry transition must begin in the correctional or juvenile facility before release, 

funding may be used for limited activities in institutional correctional settings in addition 

to the expected community-based services. 

Pregnant and Postpartum Women - FY 2007 request $3.9 million. The purpose of these 

grants is to expand the availability of comprehensive, high quality residential substance 

abuse treatment services for low-income women, age 18 and over, who are pregnant, 

postpartum (the period after childbirth up to12 months), or other parenting women, and 

their minor children, aged 17 and under, who have limited access to quality health 

services. 

KI Questions

1.) 

 The Public Health Security and Bioterrorism Preparedness and Response Act of 

2002 contains an amendment, which I authored, that requires the President to make 

available Potassium Iodide, or KI, for populations within a 20 mile radius around a 

nuclear power plant. According to the U.S. Food and Drug Administration, “KI is a safe 

and effective means by which to prevent radioiodine uptake by the thyroid gland, ... and 

thereby obviate the risk of thyroid cancer in the event of a radiation emergency.” KI pills 

are available for approximately 18 cents a pill, making them a cheap and effective way to 

protect our citizens. 
143

Question: 

 The guidelines issued August 2005 by HHS for the distribution and stockpiling of 

KI appear hostile to the intention of this provision, and appear to endorse sheltering and 

evacuation INSTEAD of KI distribution – rather than embracing KI distribution as part 

of an emergency plan that includes sheltering and evacuation options. Recent 

evacuations during the Katrina and Rita Hurricanes suggest that the Department’s 

confidence that those living nearest to a nuclear facility can be easily evacuated is wildly 

optimistic. Even if citizens are able to evacuate, during their evacuation they will likely 

be exposed to radioactive iodine and they can easily be protected from debilitating side 

effects such as thyroid cancer by taking KI. Furthermore, the guidelines put the onus of 

responsibility for designing a plan for stockpiling and distribution of KI on State and 

local governments, rather than providing these governments with guidance on these 

procedures. Given that KI is cheap, easily administered, and highly effective, why does 

HHS continue to discount the benefits of KI and not provide clear guidelines for state and 

local governments to access, stockpile, and distribute KI? 

Answer: 

 At the request of the President, HHS is working to make KI available up to 20 miles 

from a nuclear power plant. The guidelines for requesting, stockpiling and distributing 

KI within the 11-20 mile radius were published in the Federal Register in August 2005. 

We received comments on the guidelines from many sectors and have been working 

closely with other Departments and Agencies, as well as the States and the public to 

ensure that input is heard from all parties with concerns. For states who choose to 

participate in the program, the guidelines propose a process similar to that used by the 

NRC to distribute KI in the 0 -10 mile zone. As I am sure you know, there is not 

universal agreement that KI should be provided beyond the 10 mile EPZ. The KI 

guidelines present a balance perspective that addresses important considerations such as 

pediatric populations, sheltering-in-place, evacuation, special circumstances, current 

NRC protective action measures and more. The goal of the guidelines is to allow states 

to consider what distribution mechanisms, stockpiling, and utilization options best 

support their current planning initiatives. The guidelines have been submitted to OMB 

for review for compliance with all statutes, including the Paperwork Reduction Act, and 

budgetary considerations. HHS is eager to receive approval from OMB so we can publish 

the guidelines and move forward to provide KI to states that choose to apply for this 

program. 

 HHS has also taken steps to procure and make available enough pediatric (liquid) KI 

to protect children within the full 20-mile radius of a nuclear power plant in those states 

with approved KI distribution programs. This liquid form of KI is easier to administer to 

small children than the previously available tablet form. This acquisition was 

recommended by the interagency Weapons of Mass Destruction Medical 

Countermeasures Subcommittee, approved by the Secretaries of HHS and DHS and 

approved by the Office of Management and Budget (OMB), under delegated authority 

from the President. 

Stem Cell Question

1.) 

Question 

 Last year, when we urged the President to expand his policy on embryonic stem cell 

research and provide more funding for this exciting field of scientific research shows 

promise for helping treat and potentially cure juvenile diabetes, Alzheimer's and 

Parkinson's diseases, and spinal injuries, the Administration refused. However, the 

President said that he was very excited about the potential of research on stem cells that 
144

are found in umbilical cord blood. However, the President’s budget eliminates the Cord 

Blood Stem Cell Bank program. Why has the President decided to eliminate this 

program? Has the President changed his mind about the potential of cord blood stem 

cells? 

Answer: 

 Because a balance of $18 million remains from appropriations made in FYs 2004, 

2005, and 2006, the FY 2007 budget does not request funding for the National Cord 

Blood Stem Cell program. HRSA will use the funds remaining to implement the Cord 

Blood Stem Cell program during FY 2006 and FY 2007. Specifically, in each of these 

fiscal years, approximately $9 million of the remaining balance will be used toward the 

implementation of the program and the collection of an estimated total 13,800 new cord 

blood units. HRSA is committed to working with you as they begin to implement this 

important new program. 

FDA Labeling 

 In the preamble of guidance that the FDA recently released on drug labeling, to the 

guidance included language that asserted that FDA decisions should preempt the states. I 

understand that this preamble does not have the force of law. But I want to make sure that 

I understand the Administration’s position on federal preemption. Do you think that 

approval by the Food and Drug administration exempts the drug company from liability? 

If so, to what extent should companies be liable for the products they have on the market? 

1.) 

Question 

 Do you believe that people who are injured by drugs that were approved by the Food 

and Drug Administration should not have any recourse? Do you believe that they should 

not have any recourse through the state courts? 

Answer: 

 As you know, the President has called for common-sense medical litigation reform 

that would allow individuals harmed to receive fair compensation for their actual losses, 

but that would put a stop to the frivolous, out-of-control lawsuits that are driving up 

health care costs so dramatically. By reining in non-economic damages, the legislation 

will improve access to care, by stabilizing the malpractice insurance market and 

encouraging doctors to keep practicing medicine, in particular treating high risk cases, in 

their communities. 

Hearing Loss: 

 In a response to my letter about portable music players and hearing loss to Dr. James 

Battey, the director of the National Institute on Deafness and Other Communication 

Disorders (NIDCD) on February 14, 2006, Dr. Battey wrote that significant progress has 

been made in hearing research. The first program that he identified as one of the 

promising areas of research was the Newborn Hearing Screening and Early Intervention. 

The Director stated, “Results from NIDCD-supported research show that if children are 

identified with a hearing impairment by 6 months of age and then received appropriate 

intervention, they have significantly better language development than children whose 

impairment was identified after 6 months of age... Without appropriate and timely 

identification and intervention, early childhood hearing impairment interferes with the 

development of oral/aural communication, impedes academic performance, and results in 

negative long term vocational consequences.” 
145

Question 

 Why when approximately 2-3 out of 1,000 children are born each day who are deaf 

or who have a hearing loss significant enough to potentially affect their speech, language 

and cognitive development and NIH identified the importance of newborn screening does 

the President’s FY07 budget eliminate the Universal Newborn Hearing 

Screening/Trauma program? 

Answer: 

 The Universal Newborn Hearing Screening program has increased the percentage of 

newborns screened for hearing loss prior to hospital discharge. In FY 2004, 93.2 percent 

of newborns were screened for hearing loss prior to hospital discharge, exceeding the 

yearly target. The FY 2007 request continues the FY 2006 President’s Budget policy and 

provides no funding for this program. The more flexible MCH Block Grant may address 

activities under this authority. 

Ryan White: 

 According to the HHS Budget in Brief, the President’s budget request increases 

Ryan White funding by $95 million dollars and directs $70 million to “address the ongoing problem of State waiting lists and provide care and life-saving medications to those 

newly diagnosed as a result of increased testing efforts” and directs the other $25 million 

to expand outreach efforts by providing new HIV community action grants to 

intermediaries including faith and community based organization, and to provide 

technical assistance and sub-awards to grassroots organizations. 

1.) 

Question 

 How does the President intend to distribute the $70 million to the states? 

Answer: 

 The funding mechanism is under discussion within the Department. 

2.) 

Question 

 Will it go to the ADAP program or through the Title II base grants? 

Answer: 

 To allow maximum flexibility, the $70 million will be distributed to States. The 

States will have the option to use these funds to purchase medications through the State 

ADAP and to expand services for people living with HIV disease. 

3.) 

Question 

 Will the $25 million go to the Title II or IV programs or will it be distributed 

through another program? 

Answer: 

 The President proposed $25 million in the FY 2007 budget is to expand outreach by 

providing as many as 25 HIV community action grants to community and faith-based 

organizations to provide technical assistance and sub-awards to grassroots organizations. 
146

Drug Safety Questions

1.) 

Question: 

 Adderall was approved in 1960, why did it take so long for the FDA to learn about 

the full range of potential risks associated with this product? 

Answer: 

 Twelve reports of sudden death in children were reported to FDA between 1999 and 

2003. The number of deaths reported was less than the number of sudden deaths that 

would be expected to occur in this population without treatment. For this reason, the FDA 

decided not to take any further regulatory action at that time. However, upon review of 

individual cases, we noted that some of these deaths occurred in patients with underlying 

heart defects. Although this is by no means proof that such patients are at increased risk 

from this drug, because these defects themselves place patients at increased risk of 

sudden death, we, nevertheless, decided to change the labeling for Adderall XR in August 

2004 to include a warning that these patients should ordinarily not be treated with 

Adderall products. 

 In February 2005, FDA issued a Public Health Advisory and information sheets on 

its website at http://www.fda.gov to provide up-to-date information about Adderall’s 

safety profile. 

2.) 

Question: 

 How long after the FDA became aware of the safety issues associated with Adderall 

did it start an investigation?

Answer: 

 In February 2005, when FDA became aware of Health Canada’s decision to suspend 

sales of Adderall XR, but not revoke the approval in Canada, of Adderall XR as a 

treatment for Attention Deficit and Hyperactivity Disorder (ADHD), FDA reviewed the 

action it had already taken 6 months previously. Once FDA learned that Health Canada’s 

action was based on precisely the same information upon which FDA had already acted, 

it concluded that no additional labeling changes were needed, but did decide to issue a 

PHA to inform the public about Health Canada’s action and to explain that we had 

already acted and felt that Adderall and Adderall XR should remain on the market. It is 

noteworthy that Health Canada, upon receiving advice from its own advisory group 6 

months later, decided to return Adderall XR to the Canadian market. 

 As with any drug, FDA will continue to carefully assess any new data that emerges 

which significantly affects the safety profile of this drug and will take immediate, 

appropriate action to promote the public health and make the public aware of its findings. 

3.) 

Question 

 Despite the many drug safety issues that have been raised over the past couple of 

years, the Office of Drug Safety only received a $4 million dollar increase. How much of 

the ODS funding will go to: 

a. studying safety questions that have been raised about specific drugs? 

b. updating the AERS system? 

c. Setting up a program to collaborate with CMS? 

d. Looking for concerning trends within epidemiological data? 

e. the drug safety oversight board? 

f. the Sentinel System? 
147

Answer: 

 The 07 Drug Safety increase will be applied to the CDER Drug Safety Program, not 

specifically to the Office of Drug Safety. CDER's portion of the 07 Drug Safety Increase 

totals $3.564 million. 

a.) $0.425 million 

b.) $2.0 million 

c.) $0.250 million - Please note that Line c is redundant to Line f. According to 

the FY 07 Congressional Justification Drug Safety Increase description, 

“collaboration with CMS will be known as the Sentinel System”. 

d.) $0.889 million 

e.) We do not anticipate funding the costs of operating our drug safety oversight 

board from this funding increase. 

f.) Please see note under Line c. 
148

The Honorable Edolphus “Ed” Towns

1.) 

Question: 

 Secretary Leavitt, beginning in 2007 physicians will experience a significant pay 

decrease totaling $176.9 billion over the next 7 years. This decline occurs in spite of the 

fact that physicians are taking measures to offset these cuts by providing increased 

services. 

 MedPac recommended giving physicians an update to address the significant 

Medicare payment cuts that will be made to physician payments over the next 10 years 

beginning in 2007. However, the President’s budget does not adequately address the 

situation. 

 Additionally, Dr. Unterrick, a physician from my district strongly expressed the 

concern the physicians in my district have about the cuts to physician payments and their 

impact on the delivery of health care on my “News and Views” Television Program. 

 What measures are you taking to ensure that physicians who strongly desire to 

continue treating their Medicare patients will be able to do so in lieu of escalating health 

care costs and declining physician payments? 

Answer: 

 The current physician payment system focuses on payment for individual services, 

but does not provide incentives for physicians to take into account all of the services 

furnished to beneficiaries to treat an episode of care, or furnished during a period of time 

to treat chronic disease. This often has the effect of directing more resources to 

delivering care that is not of the highest quality (for example, duplicative tests and 

services, as well as hospital admissions or visits to treat potentially avoidable 

complications). Conversely, providers who have good ideas and want to take action to 

improve quality of care find that Medicare’s physician payment system does not provide 

them with the resources or the flexibility needed to do so. As a result, providers are 

unable to invest in activities that, properly implemented, have the potential to improve 

quality and avoid unnecessary medical costs. 

 Linking a portion of Medicare payments to valid measures of quality and effective 

use of resources would give providers more direct incentives and financial support to 

implement the innovative ideas and approaches that result in improvements in the value 

of care that our beneficiaries receive. Provider payment reforms should encourage 

quality and efficiency, and discourage increased complications and costs. 

 The physician community is developing quality measures that would cover a broad 

group of physician specialties and a wide range of clinical areas for physicians to begin 

reporting in 2007. We are working closely with the physician community to develop 

these evidence-based quality measures. During 2006, we are conducting a physician 

voluntary reporting program to allow physicians to report some existing quality measures 

and to allow us to test administrative mechanisms for reporting such measures. We are 

also examining the administrative issues that would be involved with alternative 

mechanisms to reward physicians who report information on quality measures. 

2.) 

Question: 

 Secretary Leavitt, I serve a very diverse congressional district, which is being 

devastated by the impact of HIV/AIDS. Fortunately, there are specialty pharmacies in 

the 10th congressional district of Brooklyn that are able to cater to those who are living 

with HIV/AIDS. 
149

 The President’s FY 2007 Budget proposes states to exhaust all other third party 

sources of payments before paying Medicaid claims. Presently, states are able to pay 

claims as received and then later bill other sources of coverage. I’m concerned that the 

proposed policy will result in payment delays for pharmacies, and may result in reduced 

willingness of pharmacies to participate in the Medicaid program, thus reducing access to 

all beneficiaries and especially those in my district. 

 What measures are you taking to address this potential situation since it could prove 

fatal to many Brooklynites? 

Answer: 

 Under current law, Medicaid agencies generally reject medical claims whenever 

there is another third party that is legally liable to pay the claims. The claims are returned 

to the provider instructing them to bill the third party. This is referred to as “cost 

avoidance.” There are some exceptions to this rule. Exceptions to this rule are found in 

sections 1902(a)(25)(E) and (F) of the Social Security Act. 

 The FY 2007 President’s Budget proposes administrative actions to discontinue all 

waivers of the cost avoidance standard for pharmacy claims. Without such waivers, 

states would be required to deny any pharmacy claim for which there is a liable third 

party payer. States will no longer have the option of “pay and chase,” or paying the 

claim and pursuing payment from a third party. 

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