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82–186 2013

A FINANCIAL REVIEW OF THE DEPARTMENT OF 

HEALTH AND HUMAN SERVICES AND ITS FISCAL YEAR 2014 BUDGET 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

APRIL 18, 2013 

Serial No. 113–33 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

(II) 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

RALPH M. HALL, Texas 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Missouri 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

BEN RAY LUJAN, New Mexico 

PAUL TONKO, New York 

(III) 

SUBCOMMITTEE ON HEALTH

JOSEPH R. PITTS, Pennsylvania 

Chairman 

MICHAEL C. BURGESS, Texas 

Vice Chairman 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

CATHY MCMORRIS RODGERS, Washington 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

RENEE L. ELLMERS, North Carolina 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

JOHN D. DINGELL, Michigan 

ELIOT L. ENGEL, New York 

LOIS CAPPS, California 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

GENE GREEN, Texas 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

HENRY A. WAXMAN, California (ex officio) 

(V) 

C O N T E N T S 

Page 

Hon. Joseph R. Pitts, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 1 

Prepared statement .......................................................................................... 3 

Hon. Frank Pallone, Jr., a Representative in Congress from the State of 

New Jersey, opening statement .......................................................................... 4 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

prepared statement .............................................................................................. 5 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 6 

WITNESSES

Kathleen Sebelius, Secretary, Department of Health and Human Services ...... 8 

Prepared statement .......................................................................................... 10 

Answers to submitted questions ...................................................................... 52 

(1) 

A FINANCIAL REVIEW OF THE DEPARTMENT 

OF HEALTH AND HUMAN SERVICES AND ITS 

FISCAL YEAR 2014 BUDGET 

THURSDAY, APRIL 18, 2013 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON HEALTH, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10 a.m., in room 2123 

of the Rayburn House Office Building, Hon. Joe Pitts (chairman of 

the subcommittee) presiding. 

Present: Representatives Pitts, Burgess, Murphy, Gingrey, 

Lance, Cassidy, Guthrie, Griffith, Bilirakis, Ellmers, Barton, Upton 

(ex officio), Pallone, Dingell, Engel, Capps, Schakowsky, Matheson, 

Green, Butterfield, Barrow, Christensen, Castor, Sarbanes, and 

Waxman (ex officio). 

Staff present: Clay Alspach, Chief Counsel, Health; Sean 

Bonyun, Communications Director; Matt Bravo, Professional Staff 

Member; Brenda Destro, Professional Staff Member, Health; Paul 

Edattel, Professional Staff Member, Health; Steve Ferrara, Health 

Fellow; Julie Goon, Health Policy Advisor; Debbee Hancock, Press 

Secretary; Sydne Harwick, Legislative Clerk; Sean Hayes, Counsel, 

Oversight and Investigations; Robert Horne, Professional Staff 

Member, Health; Carly McWilliams, Professional Staff Member, 

Health; Katie Novaria, Professional Staff Member, Health; John 

O’Shea, Professional Staff Member, Health; Monica Popp, Professional Staff Member, Health; Andrew Powaleny, Deputy Press Secretary; Krista Rosenthall, Counsel to Chairman Emeritus; Heidi 

Stirrup, Health Policy Coordinator; Lyn Walker, Coordinator, 

Admin/Human Resources; Alli Corr, Democratic Policy Analyst; 

Amy Hall, Democratic Senior Professional Staff Member; Elizabeth 

Letter, Democratic Assistant Press Secretary; Karen Nelson, Democratic Deputy Committee Staff Director for Health; Anne Morris 

Reid, Democratic Professional Staff Member; and Matt Siegler, 

Democratic Counsel. 

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH 

OF PENNSYLVANIA 

Mr. PITTS. The time of 10 o’clock having arrived, the subcommittee will come to order. The chair will recognize himself for 

an opening statement. 

2 

First, I would like to thank Secretary Sebelius for appearing before the subcommittee to discuss the Administration’s fiscal year 

2014 budget request for the Department of Health and Human 

Services. 

While the budget request is 65 days late, and both the House 

and Senate have already passed their respective budget resolutions, it is still important that the country know what the Administration’s priorities are for the upcoming fiscal year. 

As implementation of the Affordable Care Act is now a major 

item in the President’s request, this hearing will allow members to 

ask the Secretary questions about the law on behalf of our constituents. 

The law is simply not working as advertised. It was sold to the 

American people as a job creator. The Administration put forward 

an estimate that 4 million jobs would be created. Instead, red tape 

and a new employer mandate are discouraging companies from creating new full-time jobs. In many instances, workers are seeing 

their hours cut to part-time or only finding part-time jobs available. 

Even the Federal Reserve has noted that the uncertainty being created by the law is holding back hiring. I have personally heard 

from constituents who have been harmed by the mandate. 

When the government makes it more expensive and more complex to hire workers, companies will hold back on hiring. That is 

just a simple economic principle. However, that doesn’t seem to 

matter with many government regulators. The law was sold as saving the American people money. Yet today, wherever I go I hear 

from individuals and businesses facing insurance premiums that 

are growing by double digits. 

Now, you may say that this is because everyone is going to have 

gold standard, government-approved insurance. Let me remind you 

that the American people were told by the President that each family would save $2,500 a year. Now, that wasn’t a promise that came 

with a caveat. In fact, that promise was made with a deadline that 

it would happen in the first term. That first term is over, and the 

nonpartisan PolitiFact rates that as a broken promise. 

Businesses and individuals are seeing their premiums rise as a 

direct result of the law. I know that some may shake their heads 

and wonder why Republicans don’t just move along and learn to 

tolerate the ACA. Well, we should not tolerate a government law 

that makes it harder for our constituents to find and keep a fulltime job. Congress should not tolerate regulations that drive up 

costs for struggling businesses. Finally, we should not stand by and 

watch Americans with preexisting conditions be left out of the plan 

that was intended to give them coverage. 

I will continue to look for ways to make health care more affordable, more accessible and simpler for the American people. While 

it might be best if we could start by repealing the ACA, that law 

will not stop me and my colleagues from proposing constructive 

health care reforms. 

Madam Secretary, we hope that you will stay in order to answer 

all of our questions, and, with only 5 minutes of questions per 

member, we ask that you try to keep your answers concise and to 

the point. 

3 

The constituents we hear from every day, including those who 

are able to be here in the audience today, deserve answers. 

[The prepared statement of Mr. Pitts follows:] 

PREPARED STATEMENT OF HON. JOSEPH R. PITTS

The subcommittee will come to order. 

The Chair will recognize himself for an opening statement. 

First, I would like to thank Secretary Sebelius for appearing before the Subcommittee to discuss the Administration’s FY2014 budget request for the Department of Health and Human Services. 

While the budget request is 65 days late, and both the House and Senate have 

already passed their respective budget resolutions, it is still important that the 

country know what the Administration’s priorities are for the upcoming fiscal year. 

As implementation of the Affordable Care Act is now a major item in the President’s request, this hearing will allow Members to ask the Secretary questions about 

the law on behalf of our constituents. 

The law is simply not working as advertised. It was sold to the American people 

as a job creator. The administration put forward an estimate that 4 million jobs 

would be created. 

Instead, red tape and a new employer mandate are discouraging companies from 

creating new full time jobs. In many instances, workers are seeing their hours cut 

to part-time or only finding part-time jobs available. 

Even the Federal Reserve has noted that the uncertainty being created by the law 

is holding back hiring. I have personally heard from constituents who have been 

harmed by the mandate. 

When the government makes it more expensive and more complex to hire workers, companies will hold back on hiring. That’s just a simple economic principle. 

However, that doesn’t seem to matter with government regulators. 

The law was sold as saving the American people money. Yet today, wherever I 

go, I hear from individuals and businesses facing insurance premiums that are 

growing by double digits. 

Now, you may claim this is because everyone is going to have gold standard, government-approved insurance. The American people were told by the President that 

each family would save $2,500 a year. That wasn’t a promise that came with a caveat. In fact, that promise was made with a deadline, that it would happen in the 

first term. That first term is over, and the non-partisan Politifact rates that as a 

broken promise. 

Businesses and individuals are seeing their premiums rise as a direct result of 

the law. 

I know that some may shake their heads and wonder why Republicans don’t just 

move along and learn to tolerate the ACA. 

• We should not tolerate a government law that makes it harder for our constituents to find and keep a full-time job. 

• Congress should not tolerate regulations that drive up costs for struggling businesses. 

•Finally, we should not stand by and watch Americans with pre-existing conditions be left out of the plan that was intended to give them coverage. 

I will continue to look for ways to make health care more affordable, more accessible, and simpler for the American people. While it would be best if we could start 

by repealing the ACA, that law will not stop me and my colleagues from proposing 

constructive health care reforms. 

Madam Secretary, we hope that you will stay in order to answer all of our questions, and, with only five minutes of questions per Member, we ask that you keep 

your answers concise and to the point. 

The constituents we hear from every day, including those who are able to be here 

in the audience today, deserve answers. 

Thank you, and I yield back. The Chair now recognizes the Ranking Member, Mr. 

Pallone, for five minutes for his opening statement. 

Thank you. The Chair now recognizes the Chairman of the full Committee, the 

gentleman from Michigan, Chairman Upton for five minutes for his opening statement. 

Thank you. The Chair now recognizes the Ranking Member of the full Committee, 

Mr. Waxman for five minutes for his opening statement. 

4 

Mr. PITTS. Thank you, and I yield back and the chair now recognizes the ranking member, Mr. Pallone, for 5 minutes for his opening statement. 

OPENING STATEMENT OF HON. FRANK PALLONE JR, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY 

Mr. PALLONE. Thank you, Chairman Pitts, and I want to welcome Secretary Sebelius here this morning. 

Before I address the Secretary, though, I do have to say that I 

do not appreciate the comments about the ACA. I know you are 

saying that you want constructive reforms but I think that if the 

mantra of the Republican leadership is going to continue to be that 

we have to repeal the ACA, it is going to be very difficult in that 

poisoned atmosphere to talk about constructive reforms, and the 

fact of the matter is that even after the last November election, we 

continued to hear the Republican leadership both on the committee 

as well as in the full House speak out and say that their priority 

is repealing the ACA, and of course, we see that in the Ryan budget that passed the House, and too would like to move towards constructive reforms in the health care system but this constant notion 

that the priority is to repeal the ACA and that that has to go and 

that is the most important thing that we have to do for constructive reform. It really does poison the atmosphere and makes it very 

difficult for us to sit down on a bipartisan level and look at things 

that we could do together. So I will just say that. 

Today we are going to hear about the President’s fiscal year 2014 

Health and Human Services budget proposal. I want to commend 

Secretary Sebelius for your agency’s hard work this past year to 

implement the Affordable Care Act. Because of these efforts, Americans are enjoying greater access to health benefits, and I recognize 

the challenge your agency faces in implementing this law with limited resources. 

When the Affordable Care Act passed, we did not anticipate that 

States would give up the opportunity to tailor programs directly to 

their individual State’s needs and opt for federal exchanges, and I 

regret that my State, New Jersey, is one of the 26 States that will 

rely on federal exchanges rather than run its own. Again, I think 

this is pure politics on the part of our Republican Governor, but despite this, I urge the Administration to remain committed to fully 

implementing the Affordable Care Act. 

I was pleased to see the inclusion of increased funding for access 

to mental health services to protect children and communities in 

the fiscal year 2014 proposal. I said before, it is time to focus more 

attention on improving mental health services to make sure troubled kids don’t fall through the cracks, that the fiscal year 2014 

budget proposal is an important step towards making mental 

health issues a national priority and adequately funding these efforts. 

I also support the FDA’s Food Facility Registration Inspection fee 

and the Food Importer fee included in the Administration’s proposal. These fees will help ensure that the FDA has the resources 

needed to fully implement the FDA Food Safety Modernization Act, 

which of course originated in this committee. 

5 

Along the same lines, I was pleased to see that the budget proposal includes new user fees to support FDA’s Cosmetic Products 

program. Cosmetics are used extensively throughout the United 

States by all types of people, and last Congress I joined with my 

colleague, Mr. Dingell, to introduce the Cosmetic Safety Enhancement Act of 2012 to help address the lack of authority at FDA to 

regulate cosmetics. Like the President’s budget proposal, our bill 

included facility registration fees to defray the costs of cosmetic 

safety activities. So I hope we can work together on modernizing 

the cosmetic regulations. 

Before I conclude, I would like to note some concerns. First, I am 

disappointed that the funding proposal for the Children’s Hospital 

Graduate Medical Education program is only $88 million, a twothirds cut from the fiscal year 2012 level. Reducing the federal investment in pediatric will only threaten the pediatric workforce 

and threaten access to primary care. The small class of hospitals 

that receive this funding, which includes the Children’s Specialized 

Hospital in my district, represents about 1 percent of hospitals nationwide that trains approximately 40 percent of all pediatricians. 

Underfunding this program would have a major negative impact on 

access to primary care and a devastating impact on access to specialty care for children. 

And finally, I have long advocated for strengthening Medicare 

and Social Security, and I am concerned that this budget makes 

some hurtful cuts to the programs, and I really would urge the Administration to do what they can to strengthen Medicare and Social 

Security and move away from some of the cuts that the President 

has proposed. 

I know we are going to have more questions about the ACA and 

some of the funding for implementing your outreach, and I want 

to bring that up during my questions, but thank you, Madam Secretary. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the chairman of the full committee, the gentleman from Michigan, 

Chairman Upton, for 5 minutes for his opening statement. 

Mr. UPTON. Well, thank you, Mr. Chairman, and knowing that 

we have votes on the floor in about an hour, I am going to yield 

back my time and submit my statement. 

[The prepared statement of Mr. Upton follows:] 

PREPARED STATEMENT OF HON. FRED UPTON

Mr. Chairman, thank you for holding this important hearing. I want to welcome 

Secretary Sebelius back to the committee. 

This morning, we will review the president’s proposed fiscal year 2014 budget for 

the Department of Health and Human Services, which calls for nearly $1 trillion 

in spending—a budget larger than the estimated 2012 federal expenditures of the 

country of Brazil. With such massive spending levels, and a debt topping $16.5 trillion, we owe it to American taxpayers to diligently review the administration’s proposals. 

Today’s hearing will not just be an opportunity to review the president’s budget 

proposal, but it will also serve as an opportunity to bring the questions and concerns 

of our constituents about the resident’s health care law directly to the secretary, 

with the hope of getting answers. 

Even though the majority of Americans oppose Obamacare and do not want it implemented, they still need to know what they need to do to comply with the law. 

The administration has had three years to provide guidance, but many important 

questions remain unanswered. The lack of answers has caused confusion and conVerDate Nov 24 2008 14:02 Jan 14, 2014 Jkt 037690 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-33 CHRIS
6 

cern across this country on issues that are central to Americans’ lives, like whether 

small business owners can continue to provide health care to their employees. 

Take the case of a business in my district. They are a family-owned business with 

a history of good stewardship in the community. They treat their employees like 

family and have been proudly protecting them against injury or illness for many 

years. But they are worried about how the health care law creates a perverse incentive for employers to stop offering health care coverage. In a recent meeting with 

them back in Michigan, they told me that their long history of providing health coverage might end if one of their competitors decides save money by forcing workers 

into the exchanges and paying a small penalty. If other companies like the one in 

my district do not follow suit, they will not be able to remain competitive and their 

entire business could go under. 

Americans are now faced with many hard choices because of this law. With less 

than nine months until the new health care law is fully implemented, Americans 

are watching closely and becoming increasingly concerned about the law’s impact on 

their health care, their jobs, and their well-being. 

There is also cause for alarm when those with intimate knowledge of the law, its 

own authors, are predicting a ‘‘huge train wreck coming down’’ as Senate Finance 

Chairman Max Baucus said just yesterday. 

My hope is that this hearing will be an informed discussion on the department’s 

intentions for this budget and the implementation of the president’s health care law. 

The American people deserve answers, and I hope they get them today. 

# # # 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the ranking member of the full committee, Mr. Waxman, for 5 minutes for his opening statement. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you very much, Mr. Chairman. Despite the 

fact that we are going to have votes in an hour, I want to make 

some comments welcoming Secretary Sebelius to our committee. It 

has been a year since you have been here, and it has been a productive and busy year, and I want to commend you and your team 

for your tireless efforts on implementing the Affordable Care Act. 

It is difficult for most Americans to realize the enormity of the 

task you and others at HHS are undertaking to this law, but for 

the millions of uninsured in our country and those for whom insurance fails to provide the security and guarantees that they are 

looking for, there is certainly appreciation for the difference this 

law will bring to their lives as they now gain access to health care. 

The President’s budget, which is the topic of today’s hearing, includes key proposals to continue the journey forward: additional 

funding for CMS to support health insurance marketplaces, building the infrastructure needed to ensure consumer protections and 

engagement, continuing improvements in Medicare, and further investment in the successful Health Care Fraud and Abuse Control 

program. 

The President’s budget also expedites the timeline for closing the 

Medicare Part D donut hole, a provision that has already brought 

critical relief, providing $2.7 billion in savings to beneficiaries in 

2012 alone. The budget proposal also recaptures rebates for dually 

eligible seniors, a proposal that I have long supported, enabling us 

to capture over $120 billion in savings through better drug prices 

7 

over 10 years. Those are the things that are major pluses, and I 

support all of those effort in the President’s budget. 

I am concerned about some of the proposals in the President’s 

budget such as raising costs on Medicare beneficiaries. I know that 

this is put in the context to be part of a broader balanced package 

that includes both spending cuts and increased revenues. However, 

Medicare beneficiaries have lower incomes than younger Americans, more chronic conditions and health care needs, and pay significantly more out of pocket already. It makes little sense to shift 

more burden on to their backs. Such policies may inadvertently create barriers to appropriate care for vulnerable seniors, and I hope 

we can continue a dialogue on this issue. 

I also have a number of concerns, and have heard from a number 

of constituents, both providers and beneficiaries, regarding the 

dual-eligible pilot programs, especially in California. I hope I have 

your commitment to closely monitor and evaluate these dual demonstrations to assure these demonstrations for dual-eligibles, to assure protection of our vulnerable seniors and people with disabilities. 

I appreciate the Administration’s continuing commitment to public health. Specifically, I applaud the inclusion of the proposal for 

food safety registration and inspection fees, which will provide 

much-needed resources to support the Food and Drug Administration’s implementation of the Food Safety Modernization Act of 

2011. I hope we can work together to get those critical fees enacted 

into law. 

I am also pleased to see a strong investment in biomedical and 

behavioral research at the NIH of and continued support for the 

National HIV/AIDS Strategy, including through prevention, surveillance and treatment activities at the Centers for Disease Control and Prevention and Health Resources and Services Administration. 

The proposals that continue our commitment to communitybased primary care, providing additional funding for Community 

Health Centers and the Title X Family Planning program, are also 

important. 

And finally, as a Nation, we are appropriately focusing more of 

our attention on the impact of gun violence in our communities and 

the critical importance of promoting mental health and the early 

detection and treatment of mental illness. I appreciate the President’s leadership on this and am pleased that his budget reflects 

these priorities, by expanding support for gun violence surveillance 

and research at the CDC and proposing funding for both mental 

health training in our communities and for additional mental 

health professionals. 

I would be remiss, though, if I didn’t mention the need to fully 

implement mental health parity. We are anxiously awaiting the 

final rule on this important legislation, and I appreciate your assistance in securing this. 

I certainly do appreciate your being here and look forward to 

your testimony, and I yield back the balance of my time. 

Mr. PITTS. The chair thanks the gentleman. That concludes the 

opening statements of the members. Thank you. 

8 

We have one panel today. Our distinguished witness is the Honorable Kathleen Sebelius, Secretary, Department of Health and 

Human Services. Madam Secretary, welcome again. Thank you for 

coming today. You will have 5 minutes to summarize your testimony, and your written testimony will be placed in the record. 

Please make sure your microphone is on. Please speak clearly into 

it. You may proceed. 

STATEMENT OF HON. KATHLEEN SEBELIUS, SECRETARY, 

DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Secretary SEBELIUS. Well, thank you, Chairman Pitts and Ranking Member Pallone and Ranking Member Waxman and Chairman 

Upton for having me here this morning to discuss the President’s 

2014 budget for the Department of Health and Human Services. 

This budget supports the overall goals of the President’s budget 

by strengthening our economy and promoting middle-class job 

growth. It ensures that the American people will continue to benefit from the Affordable Care Act, and it provides much-needed 

support for mental health services. 

The Affordable Care Act is already benefiting millions of Americans, and our budget makes sure we can continue to implement the 

law. By supporting the creation of new health insurance marketplaces, the budget will ensure that starting next January, Americans in every State will be able to get quality health insurance at 

an affordable price. 

Our budget also addresses another issue that has been on our 

minds recently: mental health services and the ongoing epidemic of 

gun violence. While we know that the vast majority of Americans 

who struggle with mental illness are not violent, recent tragedies 

have reminded us of the staggering toll that untreated mental illness can take on our society. That is why our budget proposes a 

major new investment to help ensure that students and young 

adults get the mental health care they need including training 

5,000 mental health professionals to join our behavioral health 

workforce. 

Our budget also supports the President’s call to provide every 

child in America with access to high-quality early learning services. 

It proposes additional investments in new early Head Start 

childcare partnerships, and it provides additional support to raise 

the quality of childcare programs and promote evidence-based 

home visiting for new parents. Together, these investments will 

create long-lasting positive outcomes for families and provide huge 

returns for children and society at large. 

Our budget also ensures that America remains a world leader in 

health innovation. The significant new investments in NIH will 

lead to new cures and treatments and help create good jobs. 

Our budget will further provide support for the development and 

use of compatible electronic health records systems that have huge 

potential for improving care coordination and public health. 

Even as the budget invests in the future, it also helps reduce the 

long-term deficit by making sure that programs like Medicare are 

put on a more stable fiscal trajectory. Medicare spending per beneficiary grew at just 4⁄10ths of 1 percent in 2012, thanks in part to 

the $800 billion in savings already captured in the Affordable Care 

9 

Act, and the President’s 2014 budget would achieve even more savings. For example, the budget will allow low-income Medicare beneficiaries to get their prescription drugs at the lower Medicaid rates, 

resulting in savings of more than $120 billion over the next 10 

years. In total, this budget will generate an additional $371 billion 

in Medicare savings over the next decade, on top of the savings already in the Affordable Care Act. 

To that same end, our budget also reflects our commitment to aggressively reducing waste across our department. We are proposing 

an increase in mandatory funding for our health care fraud and 

abuse control program, an initiative that saved taxpayers nearly $8 

for every $1 we spent on it last year. And we are investing in additional efforts to reduce improper payments in Medicare, Medicaid 

and CHIP, and to strengthen our Office of Inspector General. 

This all adds up to a budget guided by this Administration’s 

north star of a thriving middle class that will promote job growth 

and keep our economy strong in years to come while also helping 

to reduce the long-term deficit. 

Now, I know, Mr. Chairman, that many of you have questions 

and I am happy to take those now. Thank you very much. 

[The prepared statement of Secretary Sebelius follows:] 

10 


82186.001

STATEMENT OF 

KATHLEEN SEBELIUS 

SECRETARY 

u.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES 

ON 

THE PRESIDENT'S FISCAL YEAR 2014 BUDGET 

BEFORE THE 

COMMITTEE ON ENERGY AND COMMERCE 

UNITED STATES HOUSE OF REPRESENTATIVES 

APRIL 18, 2013 
11 


82186.002

Testimony of 

Secretary Kathleen Sebelius 

U.S. Department of Health and Human Services 

before the 

United States House of Representatives 

Committee on Energy and Commerce 

April 18, 2013 

Chairman Upton, Ranking Member Waxman, and Members of the Committee, thank you for the 

invitation to discuss the President's FY 20]4 Budget for the Department of Bealth and Buman 

Services (BBS). 

The Budget for BBS provides critical investments in health care, disease prevention, social 

services, and scientific research in order to create healthier and safer families, stronger 

communities, and a thriving America. 

The President's fiscal year (FY) 2014 Budget for BBS includes investments needed to support 

the health and well being onhe nation, and legislative proposals that would save an estimated 

$361.1 billion over] 0 years. The Budget totals $967.3 billion in outlays and proposes $80.1 

billion in discretionary budget authority. With this funding BBS will continue to improve health 

care and expand coverage, create opportunity and give kids the chance to succeed, protect 

vulnerable populations, promote science and innovation, protect the nation's public health and 

national security, and focus on responsible stewardship of taxpayer dollars. 

Improving Health Care and Expanding Coverage 

Expanding Health Insurance Coverage. Implementation of the Exchanges, also referred to as 

Marketplaces, will expand access to affordable insurance coverage for more than 25 million 

Americans. Marketplaces make purchasing private health insurance easier by providing eligible 

consumers and small businesses with one-stop-shopping where they can compare across plans. 

New premium tax credits and rules ensuring fair premium rates improve affordability of private 

coverage. Marketplaces will be operational in 2014; open enrollment begins October I, 2013 for 

the coverage year beginning January 1, 2014. The Budget supports operations in the Federal 

Marketplaces, as well as oversight and assistance to State-based and Partnership Marketplaces. 

Beginning in January 2014, Medicaid coverage rules will be simplified and aligned with rules for 

determining eligibility for tax credits for private insurance in the Marketplaces, and millions of 

low-income people will gain coverage. The Centers for Medicare & Medicaid Services (CMS) is 

committed to working with states and other partners to advance state efforts that promote health, 

improve the quality of care, and lower health care costs. 

Also beginning in 2014, consumers will benefit from a number of new protections in the private 

health insurance market. Most health insurers will no longer be allowed to charge more or deny 

coverage to people because of pre-existing conditions. These new protections will also prohibit 

most health insurers from putting annual dollar limits on benefits and from varying premiums 

based on gender or any factor other than age, tobacco use, family size, or geography. In 

addition, new plans in the individual and small group market will be required to cover a 

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comprehensive package of items and services known as Essential Health Benefits, which must 

include items and services within ten benefit categories. Finally, most individuals choosing to 

participate in clinical trials will not face limits in health insurance coverage. This protection 

applies to all clinical trials that treat cancer or other life-threatening diseases. 

Expanding Access to Care through Health Centers. The FY 2014 Budget includes $3.8 billion 

for the Health Centers program, including $2.2 billion in mandatory funding provided through 

the Affordable Care Act Community Health Center Fund. In FY 2014, 23 million patients will 

receive health care through more than 8,900 sites in medically underserved communities 

throughout the nation. The Budget funds 40 new health center sites for the provision of 

preventive health care services, expanding outreach and care to approximately 1.5 million 

additional patients. 

Improving Patient Safety. HHS is committed to improving patient safety and reducing harm to 

patients, as reflected in the $63 million in this budget for patient safety research at the Agency 

for Healthcare Research and Quality (AHRQ). This research focuses on the risks and harm 

inherent in the delivery of health care, which helps us to understand the factors that can 

contribute to adverse events and how to prevenllhem. In FY 2014, AHRQ will fund projects on 

improving team performance, provider training, and coordination, as well as establishing cultures 

conducive to patient safety in health care organizations. This research can help the medical 

community reduce errors and improve patient safety. This research focuses on the elements 

critical to making care safer and more effective. 

Increasing Access to Mental Health Services 

The FY 2014 Budget includes over $1 billion for mental health programs at the Substance Abuse 

and Mental Health Services Administration (SAMSHA), including the $460 million for the 

Community Mental Health Services Block Grant. This block grant provides States flexible 

funding to maintain community based mental health services for children and adults with serious 

mental illnesses, including rehabilitation, supported housing, and employment opportunities. The 

Budget also proposes funding within the block grant to encourage States to build provider 

capacity to bill public and private insurance. This will support States in an effective transition in 

the first year of the Affordable Care Act, which will include expanded coverage for mental 

health and substance abuse treatment services. 

Expand Preventioll and Treatmellt/or Youth and Families. While the vast majority of 

Americans with a mental illness are not violent, and are in fact more likely to be the victims of 

violence, recent tragedies have brought to light a hidden crisis in America's mental health 

system. The Budget addresses these issues by investing $ 130 million to help teachers and other 

adults recognize signs of mental illness in students and refer them to help ifneeded, support 

innovative state-based programs to improve mental health outcomes for young people ages 16-

25, and train 5,000 more mental health professionals with a focus on serving students and young 

adults. 

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Helping Families and Children Succeed 

In his State of the Union Address, President Obama proposed a series of new investments to 

create a continuum of high-quality early learning services for children beginning at birth through 

age five. As part of this initiative, HHS and the Department of Education are working together 

to make high-quality preschool available to four-year olds from low- and moderate-income 

families through a partnership with states, expand the availability of high-quality care for infants 

and toddlers, and increase highly-effective, voluntary home visiting programs to provide health, 

social, and education supports to low-income families. Specifically. the FY 2014 HHS Budget 

includes: 

Home Visiting. The Budget extends and expands this voluntary evidence-based program that 

has shown to be critical in improving maternal and child health outcomes in the early years, 

leaving long-lasting, positive impacts on parenting skills; children's cognitive, language, and 

social-emotional development; and school readiness. The Budget proposes a long-term 

$15 billion investment beginning in FY 20 15. 

Early Head Start-Child Care Partnerships. The Budget proposes $1.4 billion in FY 2014 for 

new Early Head Start - Child Care Partnerships that will expand the availability of early learning 

programs that meet the highest standards of quality for infants and toddlers, serving children 

from birth through age three. In addition to the new Partnerships, the Budget provides 

$222 million above FY 2012 to strengthen services for children currently enrolled in the 

program. avoid further enrollment reductions, and support the Head Start Designation Renewal 

System. Together, these investments total $9.6 billion, an increase of$1.7 billion over FY 2012. 

Child Care Quality Fund. The request includes $200 million above FY 2012 in discretionary 

funds to help states raise the bar on quality by strengthening health and safety measures in child 

care settings, supporting professional development for providers, and promoting transparency 

and consumer education to help parents make informed child care choices. In addition to this 

funding, the Budget provides $500 million above FY 2012 in mandatory funds to serve 

1.4 million children, approximately 100,000 more than would otherwise be served. 

Child Support and Fatherhood Initiatives. Additionally, the Budget includes a set of proposals 

to encourage states to provide child support collections to families rather than retaining those 

payments. This effort includes a proposal to encourage states to provide all current monthly 

child support collections to Temporary Assistance for Needy Families recipients. Recognizing 

that healthy families need more than just financial support alone, the proposal requires states to 

include parenting time provisions in initial child support orders, to increase resources to support, 

and facilitate non-custodial parents' access to and visitation with their children. The Budget also 

includes new enforcement mechanisms that will enhance child support collections. 

Protecting Vulnerable Populations 

Addressiflg the Unique Needs oj Communities. The Administration for Community Living 

(ACL) was formed in April 2012 as a single agency designed to help more people with 

disabilities and older adults have the option to live in their homes and participate fully in their 

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commumtles. The FY 2014 Budget reflects the creation of ACL by bringing together the 

resources for the Administration on Aging, the Office on Disability, and the Administration on 

Intellectual and Developmental Disabilities, into a consolidated request. This newly organized 

agency works across HHS to harmonize efforts to promote community living, which can both 

save federal funds and allow people who choose to live with dignity in the communities they call 

home. ACL's Lifespan Respite Care program, as an example, focuses on providing a test bed for 

needed infrastructure changes and on filling gaps in service by putting in place coordinated 

systems of accessible, community-based respite care services for family caregivers of children 

and adults with special needs. 

Promoting Science and Innovation 

Advancing Scientific Knowledge. The FY 2014 Budget includes $31.3 billion for the National 

Institutes of Health (NIH), an increase of$471 million over the FY 2012 level, reflecting the 

Administration's priority to invest in innovative biomedical and behavioral research that spurs 

economic grow1h while advancing medical science. In FY 2014, NIH will focus on investing in 

today's basic research for tomorrow's breakthroughs, advancing translational sciences, and 

recruiting and retaining diverse scientific talent and creativity. Investment in NIH also helps 

drive the biotechnology sector and assure the nation's place as a leader in science and 

technology. 

Alzheimer's Disease Initiatives. The Department continues to implement the National Plan to 

Address Alzheimer's Disease, as required by the National Alzheimer's Project Act. In FY 2014. 

the Budget includes a $100 million initiative targeted to expanding research, education, and 

outreach on Alzheimer's disease, and to improving patient, family, and caregiver support. 

Included in this initiative is $80 million within the NIH budget to be devoted to speeding drug 

development and testing new therapies. Also, the request for the Prevention and Public Health 

Fund (Prevention Fund) includes $20 million for the Alzheimer's Disease Initiative. Of this, 

ACL will use $15 million to strengthen state and local dementia intervention capabilities and for 

outreach to inform those who care for individuals with Alzheimer's disease about resources 

available to help them. HRSA will use the other $5 million to expand efforts to provide training 

to health care providers on Alzheimer's disease and related dcmentias. 

Ryan White. The Budget includes $2.4 billion for the Ryan White HIV I A IDS CARE Act to 

continue its critical role in support of patients across the HIV/AIDS continuum, which links 

patients to care; prescribes, and improves adherence to antiretroviral medicine; and achieves 

viral suppression. Included in this total is $943 million for the AIDS Drug Assistance Program, 

an increase of$1 0 million to provide life saving and extending medications to 218,900 

individuals, an additional 1,600 people living with HIV/AIDS. 

Protecting the Nation's Public Health and National Security 

Project BioShield and Advllnced Development. In FY 2014, HHS will continue to support the 

development and procurement of medical countermeasures (MCMs) against chemical, 

biological, radiological, and nuclear (CBRN) threats. This funding includes $415 million to 

support advanced research and development ofMCMs through the Biomedical Advanced 

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Research and Development Authority. Additionally, the Budget includes $250 million as the first 

installment ofa multi-year commitment to support Project BioShield, aimed to facilitate the 

procurement of these MCMs for the Strategic National Stockpile. Together, these efforts will 

enhance the Nation's ability to acquire MCMs that will be vital to mitigating or preventing the 

effects ofCBRN threats. 

Strengthening the Nation's Food Supply. Ensuring the safety of the Nation's food supply 

remains one of the Administration's top priorities. The Budget includes $1.5 billion, an increase 

of$312 million over FY 2012, to support the Food and Drug Administration (FDA) and CDC 

activities that will develop and strengthen an integrated and prevention-based food safety 

system. The Budget supports FDA's efforts to invest in system-wide domestic and foreign 

enhancements, such as improving import safety, risk analysis, and putting in place preventive 

controls to implement the FDA Food Safety and Modernization Act. The Budget proposes the 

food facility registration and inspection user fee and an importer user fee to support FDA's 

activities in FY 2014. The Budget also increases funding for CDC to enhance surveillance 

systems and continue support of Integrated Food Safety Centers of Excellence. 

Medical Products. The Budget includes $2.6 billion, an increase of$456 million over FY 2012, 

for FDA to ensure the safety, effectiveness, and timely availability of medical products including 

prescription drugs, generic drugs, biologics, and devices, The FDA Safety and Innovation Act 

provided t{)r the continuation ofthe prescription drug and medical device user fees. In addition, 

FDA may now collect from industry fees for two recently authorized programs to support 

generic drugs and biosimilar biological products. These resources are critical to strengthen the 

medical product review process. The Budget includes resources from these user fees and also 

proposes a medical product reinspection fee. 

Infectious Disease Surveillance Modernization. The Budget invests $40 million to modernize 

CDC's surveillance technology and methods to better detect and track infectious disease. This 

investment will allow CDC to retool its national surveillance systems and detect and respond to 

emerging health threats in a timely manner. CDC's infectious disease surveillance technologies 

are becoming increasingly outdated and threaten the basic public health mission of the agency. 

In an effort to keep up with advances. CDC is making substantial investments in bioinformatics, 

database development, data warehousing, and analytics. This initiative requires strategic and 

sustained investment in the following areas: pathogen identification and detection using 

genomics, adaptation of new diagnostics, state assistance and coordination, enhanced and 

integrated sustainable laboratory systems, and tool development to support prediction and 

modeling for early disease detection. 

Focusiug on Responsible Stewardship of Taxpayer Dollars 

Contributing to deficit reduction while maintaining promises to all Americans. The HHS 

Budget makes the investments the nation needs right now, while reducing the deficit in the long 

term and ensuring the programs that millions of Americans rely on will be there for generations 

to come. While it maintains ongoing investments in areas most central to advancing the HHS 

mission to the Budget reduces support for lower priority areas, reduces duplication, and increases 

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administrative efficiencies. Overall, the FY 2014 Budget includes nearly $2.3 billion in 

discretionary terminations and budget reductions. 

The Affordable Care Act has already helped to slow rising costs through innovations that tackle 

the underlying health care costs that have been driving Medicare and Medicaid spending. In 

fiscal year 2012, per beneficiary Medicare spending grew by only 0.4 percent, and total per 

beneficiary Medicaid spending actually decreased by 1.9 percent. For the first time in a decade, 

overall health care costs grew more slowly than the economy. We are driving down costs while 

improving quality for patients by building a smarter system - for example, after decades stuck at 

19 percent, avoidable hospital readmissions fell to 17.8 percent in Medicare last year with the 

help of payment reforms and assistance to hospitals. The Budget invests in programs and 

policies that enable HHS to build on this work. 

The Medicare and Medicaid legislative proposals in the Budget seek to reduce the deficit while 

encouraging economic growth and maintaining the administration's commitment to HHS 

programs upon which tens of millions of Americans depend. Medicare savings would tolal 

$371.0 billion over 10 years by encouraging beneficiaries to seek value in their health care 

choices; strengthening provider payment incentives to promote high-value, efficient care; and 

increasing the availability of generic drugs and biologics. The Budget also includes $22.1 billion 

in savings over 10 years to make Medicaid more flexible, efficient, and accountable while 

strengthening Medicaid program integrity. Together, the FY 2014 discretionary budget request 

and these legislative proposals allow HilS to support the Administration's challenging yet 

complementary goals of investing in the future and establishing a sustainable fiscal outlook. 

Combating fraud, waste, and abuse in health care. The FY 2014 Budget makes cutting fraud, 

waste, and abuse a top Administration priority. In addition to the base discretionary Health Care 

Fraud and Abuse Control (HCF AC) funding in FY 2013 and FY 2014, the Budget seeks new 

mandatory funding to support these efforts. Starting in FY 2015, the Budget proposes that all 

new HCFAC investments be mandatory spending, consistent with levels in the Budget Control 

Act. This investment supports initiatives like the Fraud Prevention System and screening for 

Medicare providers and suppliers to reduce improper payments in Medicare, Medicaid and 

CHIP; and HHS-Department of Justice Health Care Fraud Prevention and Enforcement Action 

Team initiatives, including the Medicare Strike Force teams and the Fraud Prevention 

Partnership between the federal government, private insurers, and other key stakeholders. 

From 1997 to 2012, HCF AC programs have returned more than $23 billion to the Medicare 

Trust Funds, and the current three-year return-on-investment of7.9 to I is the highest in the 

history of the HCFAC program. The Budget's 1 O-year HCF AC investment yields a conservative 

estimate of $6.7 billion in Medicare and Medicaid savings. 

The Budget includes $389 million in discretionary and mandatory funding for the Office of 

Inspector General (OIG). an increase of$1 01 million above the FY 2012 level. This increase 

will enable OIG to expand CMS Program Integrity efforts for the Health Care Fraud Prevention 

and Enforcement Action Team and improper payments, and also enhance investigative efforts 

focused on civil fraud, oversight of grants. and the operation of Affordable Care Act programs. 

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The Budget also includes $82 million for the Office of Medicare Hearings and Appeals 

(OMHA), an increase of $1 0 million from FY 2012, to address OMHA's adjudicatory capacity 

and staffing levels and maintain quality and accuracy of its decisions. The increase allows 

OMHA to establish a new field office in the Central time zone supported by additional 

Administrative Law Judge teams and attorneys. and operational staff. 

Performance, Evaluations and Effectiveness 

Assessing tlte Impact of Healtlt Insurance Coverage Expansions on Public Health Service 

Delivery Programs. The Budget includes $3 million to the Assistant Secretary for Planning and 

Evaluation to evaluate the impact of health insurance coverage and benefit expansions among 

beneficiaries ofHHS direct service programs. These programs include Health Centers; Ryan 

White Program; Title X Family Planning Program; Substance Abuse Prevention and Treatment 

Block Grant; Breast and Cervical Cancer Early Detection Program; and Immunization, Section 

317 Grant Program, among others. This request supports the continuation of research and 

evaluation studies, collection of data, and assessments of the costs, benefits and impacts of 

policies and programs under consideration by HilS or the Congress. This data will infonn 

decisions about how to tailor policies and programs to align with new coverage options and 

support available starting in 2014. 

Thank you for the opportunity to testify. I will be happy to answer any questions you may have. 

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18 

Mr. PITTS. The chair thanks the gentlelady for her opening statement and will now begin questions from the members, and I will 

begin the questioning and recognize myself 5 minutes for that purpose. 

Madam Secretary, the President promised that the ACA would 

help to make health insurance cheaper for the American people, 

but unfortunately, exactly the opposite is happening. That is why 

one of the law’s early supporters, the Roofers Union, announced 

this week that they are now calling for the law’s repeals. I have 

a couple of guests here with us today. Sam and Elaine Stoltzfus are 

constituents of mine. They are owners of Keystone Wood Specialties in Lancaster, Pennsylvania, and their company makes kitchen 

cabinets and similar wood products, so Sam and Elaine, welcome. 

You can identify yourself. 

Sam recently wrote to me to say ‘‘We are faced with a 25 percent 

increase in health care insurance for our employees and have no 

idea of where the additional $95,000 is coming from. Help.’’ 

Madam Secretary, can you tell us this morning what help does 

the President’s budget either through its implementation of the 

ACA or other programs offer to Americans like Sam, and tell us 

what changes you are proposing in the budget to help Sam. 

Secretary SEBELIUS. Well, Chairman Pitts, we intend to complete 

the implementation of the Affordable Care Act with the resources 

requested in this budget, and one of the things that happens is the 

full implementation includes marketplaces in every State in the 

country, so small business owners, individuals who purchase health 

insurance in the individual market will have competitive insurance 

for the first time. Americans with preexisting health conditions will 

not be locked out or priced out of the marketplace, and there will 

be larger risk pools established in every State in the country. As 

you know, insurance regulation remains under State regulation. 

We are seeing nationally a trend that has the lowest level of rate 

increases in the private market that we have seen in over a decade, 

but the insurance marketplaces are not fully implemented until 

January of 2014. 

Mr. PITTS. Madam Secretary, the law passed with a provision designed to help small businesses like Sam’s, and I am talking about 

the SHOP Act, but there is no funding, there are no funding allocations for it in the President’s budget. Will that provision be able 

to help them come January 1, 2014? 

Secretary SEBELIUS. Yes, sir. I have no idea your constituent’s 

size or what kind of employer market he may be in, but the SHOP 

Act will be open in every State in—I mean the SHOP market—excuse me—will be open in every State in January of 2014. Employers will have an opinion to choose among competitive plans in 

every State in 2014. 

Mr. PITTS. Madam Secretary, did you not recently announce a 

delay for implementation of exchanges for small business until 

2015? 

Secretary SEBELIUS. No, sir. We—— 

Mr. PITTS. What did you do? 

Secretary SEBELIUS. In the federal marketplaces in the States 

where we will be running the market, the portions of the SHOP 

market that will be delayed one year are employers being able to 

19 

offer their employees multiple plans to choose from. Every employer will be able to choose from a variety of plans and offer the 

plan of his or her choice to those employees, and the employers 

who qualify for the tax credit because of the size of their workforce 

and the level of the employee’s income will also get a tax credit in 

the SHOP market but it won’t be until year two that that wider 

employee choice will be available only in the federally facilitated 

marketplaces. States may offer it starting in 2014. 

Mr. PITTS. Madam Secretary, I also hear from constituents who 

are being hurt by the ACA two or three times a week. Mostly I 

hear from constituents who had their work hours cut as companies 

try to avoid skyrocketing costs imposed by the law. Just yesterday, 

it was reported that a national movie chain with theaters in my 

district has cut some employees’ hours as they struggle to provide 

insurance for full-time employees, and right now there are fewer 

Americans working than at any time since 1979. 

My constituents are looking for full-time jobs but the ACA is 

making those jobs harder to come by. I have had another constituent from Lancaster County who wrote recently saying he retired last year after 26 years as a police officer but still needs to 

work, and his hours have been cut. He can only now work 3 1⁄2 days 

a week. Basically he is saying, and this is his quote, ‘‘Obamacare 

limits me to working 29 hours a week.’’ Tell us what help the 

President’s fiscal year 2014 provides this man. 

Secretary SEBELIUS. Well, Mr. Chairman, I don’t have any idea 

why the employers have restricted hours. There is absolutely nothing in place in the Affordable Care Act in the year 2013 that would 

impose any burden on an employer or have him cut work hours. 

What we know is in 2014, there will be new markets set up and 

an employer responsibility. Employers who have 50 or more fulltime workers or the equivalent of 50 or more full-time workers will 

be responsible for offering health insurance to those employees, and 

what we know, Mr. Chairman, is that 94 percent of employers in 

that market right now offer health insurance but often pay 18 to 

20 percent more than their large competitors because they are in 

a very volatile and very expensive market. Creating competitive options and choices for those employers is part of what the Affordable 

Care Act is all about. 

Mr. PITTS. Thank you, Madam Secretary. My time is expired. 

The chair recognizes the ranking member, Mr. Pallone, 5 minutes 

for questions. 

Mr. PALLONE. Thank you, Mr. Chairman, but with all respect, 

the Republican leadership on the committee as well as in the 

House just rabidly attacks the ACA every day. It has been going 

on for 3 years, actively trying to defund or undermine its implementation. The chairman is asking questions about no funding for 

small businesses and the health exchange, but is the Republican 

leadership willing to fund any of these things? I mean, I would be 

glad to provide more funding in the budget or through the appropriations process for implementation but I don’t believe for one 

minute I would get any support from the GOP. So, you know, it is 

a little crazy to come here and say we should repeal the ACA, we 

should defund the ACA, we should defund the ACA, we should get 

rid of this and get rid of that and then at the same time say oh, 

20 

you know, you are not implementing because you are not providing 

enough funding. 

I mean, the same thing with jobs. The GOP is saying oh, you 

know, there aren’t any jobs. Well, the sequester, which the President keeps putting out proposals every day to try to eliminate and 

have some sort of sensible budget proposals here is furloughing 

people left and right. I mean, in my district, I don’t care where it 

is, it is not just public jobs, it is having an impact on the private 

sector as well. So you can’t come in here and say oh, you know, 

people are working part time, meanwhile you support a sequester 

that furloughs people all across the country, tens or hundreds of 

thousands of people. Whatever. 

You know, some Republicans, now of course they are talking 

about the marketplaces and the exchanges won’t be ready in time 

and so I wanted you to talk, if you could, about the status of implementation of the exchanges, which is on everybody’s mind and, you 

know, give you a chance to update what progress you are making 

toward setting up the exchanges and implementing them. But 

again, if you would like to comment on the fact that Congress is 

not providing enough funding for outreach, States like New Jersey 

that rely on federal exchanges may get even less funding. So please 

don’t hesitate to say that if you are going to do outreach and implement these things that you need money that we are not giving you 

because we are not. I mean, that is the reality, but whatever. I am 

obviously very frustrated. Go ahead. 

Secretary SEBELIUS. Well, Congressman, the budget before you has a request for an additional $1.5 billion in implementation funding to fully set up marketplaces throughout the country. We are 

definitely going to be open for open enrollment in every State in 

the country starting October 1, 2013, and we will be beginning plan 

years and benefit years for individuals who currently either don’t 

have insurance or have expensive insurance or locked out or priced 

out of the marketplace because of preexisting conditions starting in 

January 2014. 

We are very pleased that 31 States and the District of Columbia 

are running all or part of their partnership programs, marketplaces 

either in partnership with HHS or doing it on their own. In the 

other States where the States had opted not to be engaged or involved, we will be running the marketplaces. We are setting up as 

we speak the federal hub with the call center and outreach. The 

resources that we had hoped to get in the Continuing Resolution 

deal with outreach and education, a huge issue of or people to actually understand what the reality is of the law, what benefits are 

coming their way, what kind of choices they will have, but we have 

reallocated some resources within the Department and fully intend 

to give people the information and the facts about the law as we 

move forward. 

Mr. PALLONE. Well, look, I think it is highly unlikely that the 

House Republicans are going to give you this money for outreach 

that you are asking for, but again, they can’t come back here and 

criticize if the outreach doesn’t occur if they are not funding it. 

Let me ask a question about the GME, the Children’s Hospital 

Graduate Medical Education program. I see that the White House 

is proposing $88 million, which is one-third of current funding. I 

21 

don’t think that is a good idea given the struggles these hospitals 

have in training of pediatricians. Wouldn’t scaling back that program take us back to the same flawed system we had in the past, 

and why would the Administration seek to reverse the success we 

have had in this area? You know, I always ask you about this, and 

you don’t have a lot of time here. 

Secretary SEBELIUS. Congressman, the funding level recognizes 

the direct costs of training pediatricians, an incredibly important 

task that a lot of children’s hospitals engage in. What we don’t 

have is the overhead and administrative costs as part of that proposal, and in a better budget time, we would have included both, 

but all of the direct costs of the residency programs are included 

in that budget recommendation. 

Mr. PALLONE. I am hoping that we on a bipartisan basis, Mr. 

Chairman, can address that because I do think that is one thing 

where Democrats and Republicans can come together to avoid that 

cut. 

Thank you, Madam Secretary. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the chairman emeritus of the committee, Mr. Barton, 5 minutes for 

questions. 

Mr. BARTON. I thank the chairman. I want to apologize to the 

chairman and the ranking member and our esteemed witness for 

not being here to hear the opening treatment. We are always honored to have you, Madam Secretary, and we look forward to dialog. 

My staff and the committee staff encouraged me to tweet and ask 

the American people for a question or two to ask you. I guess they 

decided that I wasn’t up to it. I am not sure. But in any event, we 

did it and these are two questions from real people who I don’t 

know. We had in the neighborhood of 100 tweet questions come 

back in. In the interests of transparency, we thought we would give 

the American people an opportunity to ask you a direct question 

or two. The first one is a tweeter named @JoshMertz, and his question is—I assume it is a he—‘‘How is the typical small business 

going to be able to comply with the thousands of pages of new regulations that Obamacare requires? Where are these business owners 

going to find the money to pay for the compliance? Many of them 

expressed how they will have to hire new administrative personnel 

and spend countless hours with their attorneys figuring out just 

what they have to do.’’ This is from @JoshMertz. 

Secretary SEBELIUS. Do you want me to take that and then ask 

the second one? 

Mr. BARTON. Well, let us give you a chance to answer that one 

and then we will hold the second one in reserve. 

Secretary SEBELIUS. Well, Congressman, the small business 

owner tweeter, welcome to Twitter land. I am a new tweeter myself. Depending on the size of this small business, the law may or 

may not impact the business at all. So if this employer has fewer 

than 50 full-time or the equivalent of 50 full-time employees, there 

is absolutely no impact except for the fact that in the SHOP exchange, in the SHOP market, if he wants to provide health insurance for his employees, he will have an opportunity to have some 

competitive plans and one-stop shop and go forward. 

Mr. BARTON. Let us assume they are just over that limit. 

22 

Secretary SEBELIUS. And if he falls into the over 50 full-time 

equivalent, there will be for the first time ever again a one-stop 

shop coming in through a Web site. He will not have to hire administrative personnel. He will be able to determine from a choice of 

plans what plan is best suited to his employees, offer that to his 

employees, and if he indeed qualifies for a tax credit, depending on 

the wages of that employees, that will automatically be part of the 

package moving forward. 

Mr. BARTON. Your basic answer is, he is not going to have any 

compliance costs? 

Secretary SEBELIUS. Well, depending on—I mean, there are no 

additional forms and things to fill out. The goal is really to make 

this as seamless as possible for small business owners and for individuals so that their experience is relatively simple as they come 

into the market. 

Mr. BARTON. Well, let me go to the second one, and you will 

know that I don’t know this person when I give the name. It is 

EricTheBanker@YankeesFanatic6, and I am a Ranger and Astro 

fan so there is no way I know this guy. ‘‘How does the Obama Administration justify the rising cost of health care including rising 

premiums and a reduction in work hours even before Obamacare 

is fully in effect, even though President Obama and your Department specifically promised that premiums would not rise and 

health care costs would go down?’’ So his basic question is, how do 

you justify, in spite of what was said before the fact, that rising 

costs of health care including rising premiums are going up? 

Secretary SEBELIUS. Well, as I said to the chairman a few minutes ago, first of all, the increases in private health insurance are 

at a slower pace than we have seen in well over a decade over the 

last 3 years, and that has been documented. The other kind of good 

news is that there finally is some stability in the small employer 

marketplace who were shedding policies prior to the passage of the 

ACA for well over a decade, so that has stabilized, and there is 

nothing in place right now in the legislation that would require any 

employer to change work hours, and we don’t think there is going 

to be—so whatever is happening to work hours, I think, is impossible to tie to the Affordable Care Act because there is no connection here in 2013. 

Mr. BARTON. Well, Mr. Chairman, my time is expired. I hope the 

two tweeters that we use will tweet some more questions. I think 

it is good to give the public a chance. And I do want to compliment 

you, Madam Secretary, for coming before the committee. I know it 

is difficult, and your time is limited, but we do appreciate you coming. 

With that, Mr. Chairman, I yield back. 

Mr. BARTON. The chair thanks the gentleman and now recognizes 

the ranking member of the full committee, Mr. Waxman, for 5 minutes. 

Mr. WAXMAN. Well, thank you, Mr. Chairman, and Madam Secretary, it is a tweet to have you here. 

Secretary SEBELIUS. That is so bad. 

Mr. WAXMAN. That is terrible. Wait until you hear my question. 

That was the high point of my 5 minutes. 

23 

The Republicans fought against the Affordable Care Act. In fact, 

Republicans fought against Medicare, but they certainly hated the 

Affordable Care Act. I never could understand that because it is 

based on a lot of Republican principles, proposals that Senator Dole 

and others had put forward, and they would love to repeal it. They 

would have liked the Supreme Court to throw it out. They would 

have liked for the election to go otherwise. And so they are making 

life as difficult as possible for you moving forward to implement the 

law. 

But I would just like to ask you, what would the world be like 

for health insurance if we let the insurance companies be in 

charge? Because that is what the Republicans would have if they 

repealed the Affordable Care Act. Insurance companies are businesses, and for them, it is better to get healthier insured patients 

than the sickest. So they try to exclude people who are sick. If you 

have got a preexisting condition, they don’t want you. They can discriminate against you. They can charge you a lot more. In fact, if 

you a woman, they think just being a woman is a preexisting condition. 

Secretary SEBELIUS. And I am. 

Mr. WAXMAN. That is almost as bad as my comment. So they 

would allow insurance companies to discriminate against people 

they look at as maybe costing them money, and then not only that, 

they could raise the rates if you got sick, they could drop you, they 

have these rescissions they were doing. They have all sorts of way 

of making it difficult for people who are not just healthier enough 

to cover. So tell us, what would happen to American families, consumers, seniors, particularly those with preexisting conditions, if 

Republicans repeal health reform and put the insurance companies 

back in charge? 

Secretary SEBELIUS. Well, Congressman, as you know, I served 

for 8 years as the elected insurance commissioner in Kansas and 

have worked on the insurance side of this puzzle for a long time, 

and what I saw and what we continued to see, frankly, until 2010 

was from the industry point of view, a death spiral. That is terminology used by insurers, which means they had fewer and fewer 

customers and the prices continued to rise because the people who 

stayed in the marketplace were older and sicker and needed the 

coverage. The people who dropped out were younger and healthier. 

Mr. WAXMAN. Well, you really can’t blame the insurance companies. They are in business to make a profit. 

Secretary SEBELIUS. Well, and they were experiencing, or consumers were experiencing double-digit rate increases year in and 

year out in that market, and being locked out and priced out if you 

had a preexisting condition—— 

Mr. WAXMAN. I want to move forward because there are some 

other questions and I am looking at the clock tick by. There is a 

Prevention and Public Health Fund that we set up in the Affordable Care Act. This fund is there to help fund a lot of important 

efforts to keep people well and yet there has been an ongoing attack on its since its creation. The Republicans have sought to repeal, rob and otherwise destroy this fund. Just yesterday in this 

committee, Republicans argued that the fund is merely a slush 

fund, its resources are being used inappropriately to pay for public 

24 

lobbying efforts, for example, that the Obama Administration itself 

is guilty of stealing from the fund to support activities related to 

the implementation of the Affordable Care Act, and in brief, they 

contend that the fund is not being used as intended and therefore 

should be available to support other worthy health-related initiatives such as an extension of the PCIP program. I would like you 

to take this opportunity to set the record straight on exactly how 

the Prevention Fund is and isn’t being used and why we need it 

even though you had to borrow money from it because the Republicans wouldn’t give the Administration the funds to go forward 

and fully implement the Affordable Care Act. 

Secretary SEBELIUS. Well, Congressman, I think there is a great 

track record so far with the Prevention Fund, the first time ever 

in the United States that we have focused serious dollars on preventing people from getting sick in the first place, a great track 

record on our anti-tobacco efforts, quit lines around the country, 

smoking-cessation efforts and those are beginning to show up in 

the drop in smokers. Work on chronic disease in communities continues, and you are right, we did this year appropriate about $340 

million from the Prevention Fund for 2013 to outreach and education around the Affordable Care Act. In the long run, that will 

ensure that lots of Americans who currently have no primary 

health home, who have no insurance coverage, who have no ability 

to get preventive care will indeed be connected with the benefits of 

the Affordable Care Act. 

Mr. WAXMAN. Well, nothing is more important than preventing 

disease and promoting good public health, and I hope this fund can 

be used for the purpose for which it was intended. 

Mr. PITTS. The gentleman’s time is expired. The chair thanks the 

gentleman and now recognizes the vice chairman of subcommittee, 

Dr. Burgess, 5 minutes for questions. 

Mr. BURGESS. I thank the chairman for the recognition. Let me 

just start off, it has been a tough morning. We all acknowledge 

that our friends and neighbors down in the town of West, Texas, 

just 100 miles north of Waco are suffering this morning as they dig 

out from under that rather horrific explosion that occurred last 

night, so we continue to pray for the people in Boston. We also 

need to pray for the citizens of West. 

Now, Madam Secretary, I also appreciate you being here because 

it has been almost a year since we have had an opportunity to talk. 

It has been too long. Please come back to our committee frequently. 

In fact, I would recommend to the chairman that we do have frequent visits because, as you know, October 1st becomes a very important day in the history of our country where your exchanges are 

going to go live online by statute. They are to go live online on October 1st. And I guess the question on everyone’s mind this morning is, will you be ready? 

Secretary SEBELIUS. Yes, sir, and the exchanges—— 

Mr. BURGESS. I will take that as a yes. 

Secretary SEBELIUS [continuing]. Won’t be October 1st. Open enrollment will start October 1st. The exchanges will be up and running on January 1st. 

Mr. BURGESS. Open enrollment? 

Secretary SEBELIUS. Yes. 

25 

Mr. BURGESS. Now, I do have to ask you a question about the 

Prevention Fund. I had difficulty finding that in your budget in the 

expected outlays for the Prevention Fund, but it is written in statute. It is in the so-called Affordable Care Act, section 4002, and it 

lays out the monies that will be available for successive fiscal years 

up to fiscal year 2014 where it is $1.5 billion and then for 2015 and 

every year thereafter it is $2 billion, so it is a significant amount 

of money even in Washington, D.C. Is that not correct? 

Secretary SEBELIUS. Yes, sir. 

Mr. BURGESS. And you have pretty broad transfer authority 

within that fund. Is that not correct? 

Secretary SEBELIUS. Transfer authority within the fund? 

Mr. BURGESS. That is what it says, subsection D, transfer authority, that the transfer of funds in the fund to be for eligible activities under this section subject to subsection C, which delineated 

the activities you could fund and one of those activities—— 

Secretary SEBELIUS. You can expend funds within the fund, if 

that is what you are asking, yes, sir. 

Mr. BURGESS. Yes, you can transfer funds to spend for education 

and outreach, for example. Education and outreach is going to be 

a big part of what happens with the Affordable Care Act this summer, is it not? 

Secretary SEBELIUS. Yes. 

Mr. BURGESS. So in other words, to implement the Affordable 

Care Act, you are going to take funds from the Prevention Fund 

for advertising for the benefits of the elysian fields of Obamacare 

that start this fall. Is that not correct? 

Secretary SEBELIUS. We are going to reach out to people who currently have no health insurance and who are underinsured or uninsured and inform them about the benefits of the Act and connect 

them with the Act. 

Mr. BURGESS. And how much money are you going to spend on 

that informing activity? 

Secretary SEBELIUS. Sir, we transferred about $332 million from 

the Prevention Fund to be used for outreach activities. 

Mr. BURGESS. This is an important point, and I want people who 

are watching to understand this. The Prevention Fund actually is 

like a bankbook that you can use and make a withdrawal to pay 

for advertising to advertise about the Affordable Care Act, correct? 

Secretary SEBELIUS. Sir, we are not talking about advertising. 

We have recently put out, for instance, a grant that will be available to community organizations, faith-based groups, provider 

groups in States around the country so that they will actually 

work—I don’t know if you are familiar with the Senior Health Insurance Patrol program. Individuals work with—— 

Mr. BURGESS. Reclaiming my time because our time is limited. 

We do need to talk about these people who are—— 

Secretary SEBELIUS. I am trying to. 

Mr. BURGESS [continuing]. In the preexisting-condition program, 

which unfortunately ended. Chairman Pitts had a hearing—— 

Secretary SEBELIUS. It hasn’t ended, sir. 

Mr. BURGESS. Well, enrollment has been suspended. 

Secretary SEBELIUS. That is correct. We are—— 

26 

Mr. BURGESS. So Chairman Pitts has a hearing and we hear 

from a young woman who is a lawyer in private practice, unfortunately contracted lymphoma. She has been paying her claims as 

best she can, waiting to fulfill the 6-month uninsured requirement 

to get into the preexisting-condition program, and the day before 

she is to enroll, she is told sorry, sister, we are now closed. So is 

it Obamacare or Obama don’t care? Tell me which it is. 

Secretary SEBELIUS. Well, for the individual you are talking 

about, the good news for her and millions of Americans is that beginning January 1, 2014, no American ever again will be locked out 

of an insurance pool because of a preexisting health condition, and 

that will benefit millions of people including the woman that you 

have discussed. 

Mr. BURGESS. Here is the question: rather than spend the money 

on advertising for a program that may not even work come October 

1st or January 1st, why should we not transfer money from that 

fund to actually help the people that you promised to help, the people with preexisting conditions? 

Secretary SEBELIUS. Well, sir, the preexisting-condition pool, as 

you know, was always designed to be a temporary bridge to full insurance coverage. What I hear from people all over this country is 

they are eager for the day when the rules will change once and for 

all for insurance companies. They will never again be able to lock 

anyone out because a preexisting health condition, and that is very 

different from segregating them into a high-risk pool, which most 

people cannot afford. 

Mr. BURGESS. But the important thing is that this individual and 

many individuals like her are essentially lost at sea until January 

1st at the very least, and we have—— 

Secretary SEBELIUS. The good news is—— 

Mr. BURGESS. And we have the ability to prevent that from happening, which would be the Prevention Fund. 

Thank you, Mr. Chairman. I will yield back. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the ranking member emeritus, Mr. Dingell, 5 minutes for questions. 

Mr. DINGELL. Mr. Chairman, thank you for your courtesy. 

Madam Secretary, thank you for being here today to talk to the 

committee about the Administration’s 2014 budget. I want to take 

a moment to thank you for the fine work you have been doing to 

implement the Affordable Care Act in the face of some rather nasty 

opposition by all kinds of folks including some members of this 

committee. You and your staff have worked tirelessly to implement 

health reform, a historic undertaking, and I look forward to continuing to work with you as this process continues. 

I would also like to note that you are the daughter of a former 

member of this committee, and you are always welcome. I am sure 

you view this as something of a home too, so welcome. 

Secretary SEBELIUS. Thank you. 

Mr. DINGELL. In any event, Madam Secretary, yes or no questions. You are working now on the FDA Food Safety Modernization 

Act. The legislation made historic improvements in our food safety 

system and provided new authorities to help FDA to prevent food 

safety problems before they occur throughout the food supply. This 

27 

legislation, which I authored, included a dedicated source of funding for the implementation of food safety through a facility fee, a 

reinspection and recall fee and a fee for importers and exporters. 

Unfortunately, some of our friends on the other side of the Capitol 

did not see the wisdom of the fees that they passed overwhelmingly 

here in the House. The President’s fiscal 2014 budget requests 

$225 million in resources through fees to help fund the implementation of the food safety law. Is that correct? 

Secretary SEBELIUS. Yes, sir. 

Mr. DINGELL. Now, these proposed fees include a food facility 

registration and inspection fee and a food importer fee. Is that correct? 

Secretary SEBELIUS. Yes, sir. 

Mr. DINGELL. Madam Secretary, can you explain briefly what 

these activities and these fees will be used for? 

Secretary SEBELIUS. Well, there is no question that in the 70 

years between the time that Congress passed the new food safety 

measure a few years ago and the last time food safety measures 

were updated that the market has changed dramatically. We have 

a global market. About half of our fruits and vegetables and twothirds of our seafood come in from overseas. We have a different 

kind of—— 

Mr. DINGELL. Huge imports occupy a very high proportion of 

American consumption. 

Secretary SEBELIUS. Yes, sir. 

Mr. DINGELL. And we are finding that that seems to be about the 

only way we can get the FDA properly funded to carry out its mission. Is that right? 

Secretary SEBELIUS. They definitely need new resources to build 

a new food safety system. 

Mr. DINGELL. Particularly in the area of new drug approvals. Is 

that right? 

Secretary SEBELIUS. That is correct. 

Mr. DINGELL. Now, Madam Secretary, do you believe these fees 

help FDA to implement the food safety law effectively and in a 

timely manner? Yes or no. 

Secretary SEBELIUS. I do. 

Mr. DINGELL. Another area of interest to me is cosmetics. FDA’s 

authorities over this industry are woefully outdated. The industry 

itself has requested improved authority for the FDA in this area 

to better ensure the safety of cosmetics, and I know the industry 

has requested this to their great and lasting credit. The Administration has proposed a cosmetic user fee of $19 million. Is this correct? 

Secretary SEBELIUS. Yes, sir. 

Mr. DINGELL. Madam Secretary, can you explain the fees’ purposes and the activities that this user fee will be used to support? 

Secretary SEBELIUS. Again, it will be used to really update the 

regulatory capacity and add new technical expertise. As you say, it 

is requested by the cosmetics industry so we are very hopeful to 

work with Congress on implementing this update to the reinventing cosmetic fee initiative. 

Mr. DINGELL. Now, Madam Secretary, this business of fees for 

FDA began when this committee worked out a deal with the pharVerDate Nov 24 2008 14:02 Jan 14, 2014 Jkt 037690 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-33 CHRIS
28 

maceutical industry to enable the pharmaceutical industry to get 

better service from FDA on new drug applications. Is that right? 

Secretary SEBELIUS. New drug applications and new device applications, yes, sir. 

Mr. DINGELL. Well, actually it has moved through new drug, new 

devices, over-the-counter and all kinds of things, and that has 

worked out very, very well from the standpoint of industry and the 

standpoint of government and consumers. Is that right? 

Secretary SEBELIUS. It has definitely expedited the ability to put 

things on the market more quickly. 

Mr. DINGELL. And it is actively supported by the industry? 

Secretary SEBELIUS. Yes, sir. 

Mr. DINGELL. And prior to the time of that legislation, it is interesting to note that Food and Drug would take as much as 10 years 

of the 17-year period on the patent, the end result of which was 

that the industry lost hundreds of millions or even billions of dollars. People were denied the availability of useful new pharmaceuticals, which could help deal with some of the serious medical 

and health problems in the country. Is that right? 

Secretary SEBELIUS. That is correct. We were losing to global 

competitors because of the pace of approvals. 

Mr. DINGELL. Madam Secretary, thank you for being here, and 

good luck in implementing the legislation that is so important, the 

Affordable Care Act. Thank you. 

Thank you, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the gentleman from Pennsylvania, Dr. Murphy, 5 minutes for questions. 

Mr. MURPHY. Thank you. 

Madam Secretary, I appreciate you being here today. I have, first 

of all, a question, and I recognize in your position you may not get 

the letters that we send over, but there was a bipartisan letter sent 

to your office signed by myself, Chairman Upton, Ranking Member 

Waxman, Diana DeGette and others regarding a follow-up on number of mental health issues. I am not sure if you saw that, but we 

had asked for a response in February. We have not received a response yet. I brought another copy here. Can I get that to you and 

get it right to your desk? 

Secretary SEBELIUS. Yes, sir. 

Mr. MURPHY. I appreciate that. It is important as we make sure. 

And I appreciate your focus on mental health. I am a psychologist 

myself. I also know in your statements you had requested some 

funding increases in a number of areas. 

Another thing, and I hope you can take this message to the 

President as well is, I have reviewed or tried to review what the 

federal government spends on mental health in a wide range of 

areas: in HHS, Judiciary, Education, Department of Defense, Veterans Administration. It appears that no one has a handle on how 

much money we spend in mental health in a broad perspective. No 

one has ever done an inventory on that. So Representative DeGette 

and I sent a letter over to the Office of Management and Budget 

with a copy to the President asking for an inventory of all that we 

do, and I think that would be important because we need to know 

how much we spend, where we spend it, and following that, is it 

29 

even effective such as does it get to the level of the patient. When 

you are talking about one in five people at any given time have a 

mental health disorder and that perhaps only 40 percent of those 

with mental illness get treatment, that we heard before during a 

hearing we did post Newtown from the head of NIMH that it is 

about 112 weeks before someone even gets treatment for a psychotic disorder, and you also pointed out in your testimony that it 

is about ages 14 to 25 when some of these disorders appear and 

that every one of these mass murderers was generally in that age 

range, I think all but one was male, psychotic symptoms and other 

things. We recognize severe mental illness are not all violent. A 

vast majority are not. But it is an area that we are all deeply concerned. We need to know what we are doing and are we doing the 

right thing. And so will you be able to get us a response to that 

letter? 

Secretary SEBELIUS. Yes, sir, we will definitely. 

Mr. MURPHY. Thank you. Another issue has to do with mental 

health parity. That bill was passed over 4 years ago, and we still 

have not seen regulations. Do we have a date yet by which we 

might see something? 

Secretary SEBELIUS. We are committed to finalizing the rule this 

year and are in the process of doing just that. We do have interim 

final rules that have been promulgated 2 years ago and so those 

are in place right now. 

Mr. MURPHY. Thank you. And another area, we were talking a 

little bit about the FDA here. I noticed recently a substance by the 

name of Jacked with a backwards 3 and therefore the letter E was 

recently put out as a ban because some substance within it was 

perhaps associated with—we don’t have a direct link—but perhaps 

correlated with a couple deaths. I know the military has asked that 

all these products be removed from commissaries and exchanges on 

military bases. I don’t know if you have had a chance to look at 

this but my question is, are these products still being sold online 

or in stores, and if you could get back to me with information on 

that, because I recognize we don’t want a dangerous or potentially 

dangerous substance out there for people to take. 

Another area I wanted to bring to your attention to in terms of 

supplements, the December issue, I think it was Military Medicine, 

said that with regard to supplements, they did a survey of supplements sold on military bases. They found that only 12 percent of 

manufactured supplements actually had an independent body 

verify what is in it. We have seen studies that said even vitamin 

D content in vitamin pills may range from less than 10 percent of 

what it is supposed to have 140 percent of what it is supposed to 

have. So 12 percent have an independent verifier. About 28 percent 

verify themselves the content whatever that is, a mineral, a supplement, a vitamin, and the rest, 60 percent, have nobody verifying 

at all what is in them. Somewhere within your agency I am sure 

someone is taking a look at that, and I would appreciate information back on that. It is a massive industry in America geared to 

help people stay healthy. We want people to stay healthy. But I 

sure would like to know what is in that. 

Secretary SEBELIUS. Well, Congressman, I can tell you, we would 

love to work with you around that issue. A lot of these supplements 

30 

and additives fall into a very gray area where they are not sold as 

medical products, they are not sold as pharmaceuticals, they are 

sort of food additives and that often is kind of outside the FDA jurisdiction, but we would love to pursue that issue with you. 

Mr. MURPHY. Thank you. I look forward to meeting with you. 

Thank you very much, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the gentlelady from California, Ms. Capps, 5 minutes for questions. 

Mrs. CAPPS. Thank you, Mr. Chairman, and welcome, Madam 

Secretary. 

As you know, my State of California has consistently taken a 

leadership role in health reform implementation, and now I have 

heard concern from hospitals in my district about the financial impact of the disproportionate-share hospital, the DSH program cuts, 

and reductions on the providers who are in States like California 

making a good-faith effort to implement the Affordable Care Act. 

Could you speak to the proposed DSH reduction schedule and how 

this proposal will help facilitate a smooth transition of full ACA implementation? 

Secretary SEBELIUS. Congressman, we were hearing similar reports from hospital executives around the country, and in the midst 

of an attempt to really fully engage in the health market so the determination that we have made recently is that the Medicare cuts, 

which have a specific timeline around DSH, will proceed with implementation in 2014. We are committed to fully reducing DSH 

payments by the amount suggested in the ACA schedule but not 

beginning the Medicaid DSH reductions until 2015. 

Mrs. CAPPS. When DSH cuts are set to take effect, how is CMS 

going to recalculate the hospital’s needs for the funds? Will hospitals in States like California where we are embracing a Medicaid 

expansion have a fair shot at the funds when up against the—in 

other words, do we get our fair share? Thank you. 

Secretary SEBELIUS. Well, and the goal, as you know, when you 

authored or helped to author the Affordable Care Act is that as additional Americans were able to be covered by health insurance or 

by Medicaid expansion, that would reduce the level of uncompensated care that hospitals currently experience. So it is designed to 

be a complement but we are conscious of the notion that that won’t 

be a direct match and we are looking very carefully and doing a 

lot of outreach about what is the most effective way to implement 

the cuts that are proposed in the law. 

Mrs. CAPPS. Well, I appreciate that and your willingness to do 

all you can to ensure a smooth transition as the ACA goes into full 

effect. We want to be partners with you, and I want to highlight, 

however, that we are watching carefully. It would be unfair if 

States that are acting in good faith like California are harmed because of other States’ policies, and I am sure you are aware of that 

and I know you are going to keep that in mind. 

One last question. This delay in DSH reductions is just a proposal, right? 

Secretary SEBELIUS. It is proposed in the budget this year. 

Mrs. CAPPS. Right, a proposal. 

Secretary SEBELIUS. I know it was proposed. I just wanted to 

make sure. 

31 

Mrs. CAPPS. Exactly. This is an important distinction. I believe 

as implementation continues to be hampered by politics, some governors are using the proposed delay in DSH cuts as an excuse to 

delay in making a decision on Medicaid expansion. I think this is 

irresponsible and pretty cruel to constituents. Anyway, while cut 

delays are just a proposal, the impact of delaying the decisions is 

not. 

There is a little over a minute left. As someone who was formerly 

a visiting nurse myself, I believe the renewed commitment to maternal, infant and early childhood home visiting programs is just 

excellent and a good preventive and cost-saving way to deliver 

health services. Their support is bipartisan, and they are evidence 

based. These programs work and they are critical to improving 

health outcomes for women and children and really for families. 

Could you detail the proposed investment in these programs over 

the next 10 years? There is not much time to do it but highlight 

it so we can follow up. 

Secretary SEBELIUS. Well, I think one of the very exciting secondterm initiatives that the President believes in very strongly is an 

infrastructure around early childhood starts. So it includes Health 

and Human Services, increases in investments in home visiting 

programs which, as you say, are evidence based and not only are 

wonderful for health but also very proven to reduce violence and 

is a great strategy for resilience in children, increases in our early 

Head Start childcare partnership effort, and then in the Department of Education budget is a significant increase in pre-K programs in partnership with States around the country and that infrastructure, to make sure that by the time children are 5 and hit 

school, they are not only ready to learn but they are socially and 

emotionally ready to be in a classroom we see as a critically important investment to make in the future. 

Mrs. CAPPS. Thank you, and this really gets at our disparities in 

health care as well in a very clear way. 

Thank you, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentlelady and now recognizes 

the gentleman from Dr. Gingrey, for 5 minutes for questions. 

Mr. GINGREY. Thank you, Mr. Chairman. 

Madam Secretary, as one of the physician members of the committee, you know I have always been unwavering in my commitment to the full repeal of Obamacare, but now as we approach full 

implementation, however, I believe that we must chip away at the 

most egregious parts of the law, and to that point, Secretary 

Sebelius, you stated in a speech in Philadelphia in late March of 

this year that some men and younger customers could see their insurance rates increase because of the Patient Protection and Affordable Care Act. Do you think that it is fair that young people 

will pay higher insurance rates because of this law? 

Secretary SEBELIUS. Sir, I think we don’t know what the rates 

will look like until the insurers file their plans, and the very good 

news is that State insurance departments around the country have 

additional resources to review those—— 

Mr. GINGREY. In the interest of time, I am asking you a simple 

question. Do you think that it is fair that Obamacare asks young 

32 

people to pay higher insurance rates? I know you don’t know what 

they will be but is it fair? Do you think it is fair? 

Secretary SEBELIUS. Well, there is nothing in the law that asks 

young people to pay higher rates. 

Mr. GINGREY. Well, Secretary Sebelius, actuarian Oliver 

Wyman’s firm produced a study that identified how wealthy a 

young person had to be before their health costs went up because 

of Obamacare. I ask you this: Do you happen to know how wealthy 

a young person in 2014 when you have fully implemented these exchanges will have to be, how wealthy that person would have to be 

to not pay higher out-of-pocket insurance premiums? 

Secretary SEBELIUS. It is an impossible question, but what we 

know about young people right now who are not insured, a number 

of them are on their parents’ plans until age 26. 

Mr. GINGREY. Well, we are talking about, assume that this person is 27 years old. 

Secretary SEBELIUS. Then anyone under 400 percent of poverty 

will quality for a tax subsidy, an upfront tax subsidy, and will have 

insurance policies with far lower copays and coinsurance and outof-pocket—— 

Mr. GINGREY. Well, Madam Secretary, the answer, according to this actuarial study, is $25,000. Secretary Sebelius, do you think 

that asking a young person who makes $25,500 to pay more for 

their insurance under Obamacare, is that fair? 

Secretary SEBELIUS. Well, that isn’t accurate, unfortunately. Somebody who is making $25,500 would definitely qualify for a 

subsidy if he or she is purchasing coverage in the individual market so they will not pay more out of pocket than—— 

Mr. GINGREY. I don’t know how much that subsidy might be, 

Madam Secretary, but even with the subsidy, they will be paying 

more under Obamacare than they would be paying 4 years ago for 

the same insurance coverage. 

Secretary SEBELIUS. That is absolutely not true. 

Mr. GINGREY. That is absolutely true, and let me ask you this 

next question. Has your Department created contingency plans in 

the event that young people like I just described choose to pay the 

penalty instead of purchasing the insurance that they can’t afford? 

Have you developed a contingency plan in the event that that occurs? 

Secretary SEBELIUS. No, sir. We intend to implement the law, 

but I think educating young people about what options they will 

have that they do not have now, that they will be in a larger pool, 

that there are subsidies available to them which they absolutely do 

not know and that they will have full insurance coverage. Young 

women know that no longer will it be legal for an insurance company to charge 50 or 75 percent more for exactly the same coverage. 

Mr. GINGREY. Well, I only mentioned young men because that 

was who you addressed in that speech in Philadelphia. And look, 

you are lot more optimistic obviously about how this is going to 

work in these exchanges on January 1, 2014, than I am, but I 

would highly recommend to you, Madam Secretary, that you do develop a contingency plan in the event that so many of these young 

people look at that and say hey, look, here I am straight out of colVerDate Nov 24 2008 14:02 Jan 14, 2014 Jkt 037690 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-33 CHRIS
33 

lege, I am now 27 so I am not on my parents’ policy, and furthermore, they kicked me out of the basement, I have got $250,000 

worth of higher education debt, I am engaged, I am trying to build 

a life, I have got a job. I strongly suggest that your Department 

create this contingency plan, and I would suggest that you submit 

that to me and this committee and furthermore not let a train 

wreck or any other excuse slow it down, and I yield back the balance of my time. 

Secretary SEBELIUS. Well, Congressman, the other thing that is 

available to your young person who is engaged is a choice of a fully 

insured plan or a catastrophic plan. What we know is putting that 

young person in a large pool automatically by entering the marketplace will be significantly more beneficial than he or she shopping 

in the individual market where they have no rules and no protection, and if indeed they get any kind of preexisting condition, they 

could be booted out in a heartbeat. 

Mr. GINGREY. Mr. Chairman, since you let her go a little bit over, 

just let me address the issue of age banding because of your rules, 

you are going to force these young people to pay higher rates than 

somebody 58 years old who can well afford to pay better than they 

can, and you ought to let the States decide that. 

Mr. PITTS. The gentleman’s time is expired. The chair recognizes 

the gentleman from Utah, Mr. Matheson, 5 minutes for questions. 

Mr. MATHESON. Thank you, Mr. Chairman, and Madam Secretary, thanks for coming before the committee today. 

In the Department’s fiscal year 2014 budget is included the implementation of copayments for Medicare home health beneficiaries 

per MedPAC’s recommendations. The new copays on home health 

would be a tool to reduce overutilization and create savings for the 

program. Now, looking at ways to reduce the overutilization and 

create savings is something we all want to do. I do have some concerns, though that with the proposals that ask beneficiaries to pay 

more out of pocket, particularly those who would be paying are 

probably a little more sick, less financially secure. And allied to 

that, I have concerns with asking seniors to pay more when there 

are strong indications of fraud and abuse in certain geographic 

areas of our country in the home health care industry because 

MedPAC’s March report identified—there are basically five big 

ones, five specific geographic areas where there is strong reason to 

believe that fraudulent billing practices are in play in the home 

health care industry. For example, it is a nice comparison, there 

are about 190,000 Medicare beneficiaries in my State and there are 

about that many in Miami-Dade County. In Utah with the same 

number of beneficiaries, we have about 100 home health care providers. In Miami-Dade County, it is nearly 700. The average benefit per beneficiary in Miami-Dade County is five or six times what 

it is in Utah. 

So we have a situation where in a few geographic areas, there 

seems to be some bad actors, if you will, and it strikes me that 

there is something wrong in places like Miami-Dade County. So I 

guess my point, which I am sure you understand, is, in terms of 

looking for savings and efficiency, it seems to me we might be looking at situations where those geographic disparities reflect that 

there may be some activities going on that are not right. And I was 

34 

wondering if you looked at what your authority might be or using 

your authority to limit issuance of new provider numbers in these 

geographic regions which have strong indications of this type of 

overutilization. 

Secretary SEBELIUS. Well, Congressman, we are doing more than 

looking at re-credentialing providers. We actually have at the 

President’s direction really ramped up our antifraud efforts around 

particular durable medical equipment where there are very erratic 

billing patterns. Home health is another high target. We recently 

have seen some mental health services and some pharmaceutical 

services. We have a very active strike task force, a HEAT task 

force including U.S. attorneys and on-the-ground folks from our Inspector General’s office working together in Miami-Dade County 

and a number of other areas. They are not in Utah right now because we are not seeing that kind of billing practice but fraud and 

abuse we are taking very seriously. We have returned historic returns to the Medicare trust fund and in fact to Medicaid programs 

around our strike efforts, which is why we are asking for new mandatory funding, frankly, because we are returning about $8 for 

every dollar that we are appropriated, and I think that is an incredibly important investment to make sure that people don’t steal 

from these programs and that the services are delivered to people 

who want them and need them. 

Mr. MATHESON. Do you feel like you have the appropriate authority based on legislation to use data analysis and analytics to 

really target these areas that have these problems? 

Secretary SEBELIUS. Actually, we have finally for the first time 

built over the last couple of years predictive modeling, the same 

kind of computer analysis that credit card companies and other 

banks have used for years. Medicare has never done that. So we 

are actually able not only to target areas where they are great billing irregularities but actually target the types of services and focus 

a lot of time and attention with our prosecutors, with our investigators, and our goal is to shut it down before it happens, not to continue to do the pay and chase but actually to move in and shut 

down these operations. 

Mr. MATHESON. Are there any particular impediments you see in 

front of you that are limiting your ability to do this? 

Secretary SEBELIUS. Well, the biggest impediment is resources. 

Ironically, the return is so great and yet for the last number of 

years we have not gotten the appropriation even up to our budget 

limit. So I would just urge the committee, I think fraud and abuse 

is something that people agree on. We have a great track record. 

We can show you dollar for dollar what is going on but our restrictions are really on resources. 

Mr. MATHESON. Thank you, Madam Secretary. I yield back, Mr. 

Chairman. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the gentleman from Louisiana, Dr. Cassidy, for 5 minute for questions. 

Mr. CASSIDY. Thank you, Madam Secretary. As you know, we 

have got 5 minutes, so if I seem like I am speaking like an auctioneer, I am, and if I occasionally interrupt, it is not to be rude; 

it is to maximize our time. 

35 

I will start off with a couple yes or no questions. In January 

2012, the President announced plans to streamline government 

agencies like the Department of Commerce with this statement: 

‘‘Our economy has fundamentally changed as has the world but our 

government has not. Often it has grown more complex.’’ He has 

also stated that he supports reforms to federal agencies that result 

in more efficiency, better service and leaner government. Yes or no, 

do you believe that federal agencies should be mindful of our current economy and operate in ways that result in more efficiencies? 

Secretary SEBELIUS. Yes. 

Mr. CASSIDY. Second yes or no. The President’s fiscal year 2014 budget proposal for HHS is $967 billion and seeks $80 billion in 

discretionary spending, roughly $60 billion more than last request. 

Yes or no, understanding the President’s commitment to efficient 

government agencies and knowing the difficult budget situation our 

Nation faces, could you accept a 2 percent reduction in your agency’s total HHS request? 

Secretary SEBELIUS. No, sir. 

Mr. CASSIDY. And if you can’t, can you defend all the expenditures in the agency as outlined in the President’s budget, not even 

a 2 percent cut anyplace? 

Secretary SEBELIUS. I am happy to do that in a more robust conversation but I think the 5 minutes probably won’t allow that to 

happen. 

Mr. CASSIDY. Well, thank you, and I understand that, and I appreciate your sensitivity to the time. 

Next, following up on what Ms. Capps said, my State also has 

a lot of uninsured. Our governor has not yet indicated that he is 

going to accept the Medicaid expansion. It is going to cost our taxpayers $1.2 to $1.8 billion in State tax money to implement. But 

I am a doc that takes care of the uninsured. The DSH program, 

as we know, has helped support care for those folks. If a State does 

not accept the Medicaid expansion, obviously there is concern that 

they would lose the DSH based upon a decrease in the national uninsured rate, although the uninsured rate within the State may 

still stay higher. 

We sent a letter to your office dated February 11th asking for a 

reply by March 1st. It may have been a tight timeline. I apologize. 

But have really not received a reply since. Can I give you a clean 

copy of this letter and ask if you guys can respond to it? I don’t 

mean this as a gotcha. I mean it totally as a fellow who is advocating for his uninsured. 

Secretary SEBELIUS. Certainly. 

Mr. CASSIDY. Thank you. Next, my gosh, don’t we all still have 

a heartbreak for the issue of mental illness in our Nation? There 

was an article in the Wall Street Journal from 2006 but apparently 

still apropos, ‘‘A Death in the Family’’ regarding William Bruce. 

Mr. Bruce was hospitalized with severe schizoaffective disorder, I 

believe, and there is an agency that got federal dollars, Protection 

and Advocacy for Individuals with Mental Illness who, according to 

the article, and I have been in communication with the father, they 

actually coached the young William as to how to give his answers 

to providers that he could get released. He did. The providers did 

not inform the family that he was still psychotic, and he went out 

36 

and he murdered his mother. Incredible. Now, this agency, we have 

looked to see if they put in reforms to ensure that they are no 

longer doing this, have been unable to. I do see that they continue 

to receive $36 million a year. Can you provide us follow-up or some 

guarantee that the Protection and Advocacy for Individuals with 

Mental Illness receiving $36 million a year in some way is no 

longer doing this? 

Secretary SEBELIUS. Well, Congressman, I have no idea what the 

agency is or does or what they advocate. 

Mr. CASSIDY. I accept that. 

Secretary SEBELIUS. I can tell you, though, that about 65 million 

Americans who currently have no mental health or substance 

abuse benefits either through access to new marketplaces and new 

affordable health insurance or Medicaid expansion will finally 

have—— 

Mr. CASSIDY. I don’t mean to interrupt. And that again was not 

a gotcha question and I didn’t expect you to know that kind of 

micro level, but I think we all are concerned that this is not being 

funded by our federal government, or if it is, that there is some reform. So we will give you some information on that if you could 

reply please. 

Next, in his Now is the Time plan to address gun violence, the 

President promised to do the following: address unnecessary legal 

barriers, particularly related to HIPAA, which may prevent States 

from making information available to background check systems; 

two, releasing a letter to health care providers clarifying no federal 

law prohibits them from reporting threats of violence to law enforcement authorities; and three, starting a national dialog on mental illness. Can you just give us an update of progress as regards 

these three things? 

Secretary SEBELIUS. Sure. The letter to providers went out fairly 

immediately after the President’s announcement of the package of 

administrative initiatives that we were going to put in place, and 

I would be happy to provide this committee with a copy of that letter, reminders providers that there actually is a duty to warn and 

there are no HIPAA barriers against coming forward when somebody is likely to be dangerous to themselves or others. Secondly, we 

have just put an ANPRM, an Advanced Notice of Proposed Rulemaking, that would ask the States to identify what they see as the 

barriers. Our frustration is, we don’t think there are barriers to collecting the information that is requested. States have said that 

they see those barriers, so we want to know what they are so we 

can directly address them, and that has gone out this week, and 

we are in that dialog, and within the next month or so, we intend 

to launch the national dialog. We already are working with mayors 

and community groups in communities across this country. It will 

be a public-private partnership, privately funded, community dialogs, toolkits by our office, meetings in communities, but the dialog 

will be a yearlong effort to really bring mental health conditions 

out of the shadows and make it clear to people where they can go 

for help. 

Mr. CASSIDY. If I can help you, please let know. 

Mr. PITTS. The gentleman’s time is expired. The chair recognizes 

the gentleman from Texas, Mr. Green, 5 minutes, sir. 

37 

Mr. GREEN. Thank you, Madam Secretary, for your time, and I 

commend you and the President for writing a budget proposal that 

as a whole puts our country’s health system on the right path forward. 

My first question, I am a strong supporter of the Affordable Care 

Act and I look forward to the next few months to learn how it will 

be implemented across the country, especially in my home State of 

Texas, and I know you were there last year and we talked briefly 

about this in one of your visits to one of our level I trauma centers 

in Houston. We have spoken about the importance of providing a 

robust exchange in States like Texas that opt out of creating their 

own system. Our time today is so short and so it is not necessary 

to get into it now, but in the next few days could you or your office 

provide us in writing a status report on the creation of the implementation of the Texas State exchange? Again, you don’t have a 

partner so we need to make sure, and I know we are not the only 

State that is in that boat. We may be on Medicaid but not on that. 

Secretary SEBELIUS. We would be glad to do that. 

Mr. GREEN. My next question is something we haven’t contacted 

you about, about the disproportionate share hospital payments. It 

was recently brought to my attention in an informal process that 

CMS changed their DSH payment procedures to children’s hospitals in certain instances. As I understand it, children’s hospitals 

having their DSH payments reduced because of commercial insurance revenue is counted as Medicaid revenue. It is important to 

note that despite CMS continuing insisting that this is double dipping, it is my understanding that this happens even though the patients may be enrolled at Medicaid, that their private insurance is 

paying the bills. There is no payment for Medicaid being made and 

the children’s hospitals never include these children in their Medicaid cost reports in any way because they are never considered 

Medicaid-program patients. However, for some reason, CMS determined that these are Medicaid payments and reduces their DSH 

payments. Are you familiar with the problem? 

Secretary SEBELIUS. I am somewhat familiar but would love to 

have a chance to get back to you with specifics. 

Mr. GREEN. OK. What I would like to do is work HHS to remedy 

the problem, and we have a great hospital and medical center in 

Texas Children’s Hospital and we have hospitals all over the country that are children’s, and erroneous reductions have come close 

to eliminating their DSH payments, and they do cover a lot of uninsured children who are not under Medicaid. In States like Texas 

where Medicaid may not expand, DSH is a critical revenue stream, 

so TCH provides a valuable service to our community and it should 

receive all the funding they are entitled to under the law, and this 

is an urgent issue, and I don’t think it is the intent of HHS to 

harm our children’s hospitals, and it cuts across State lines. This 

is not a Texas-only problem. 

Secretary SEBELIUS. We would be very willing to follow up with 

you, Congressman. I think the issue that was trying to be addressed was in the dual-eligible area if you double count what is 

happening, but I am a little unclear how exactly that impacts children and what is happening in the children’s hospitals. 

38 

Mr. GREEN. We will get you some information. I appreciate it. 

My next question deals with sequestration and the effect on Part 

B drug payments to providers such as cancer clinics. It is my understanding that because of the sequester and because of the way 

the underlying ASP is calculated to include prompt payment discount, many providers have been reimbursed less than they pay for 

the drug. Madam Secretary, does HHS have any flexibility if access 

to providers becomes an issue for beneficiaries to modify the payments so that providers are reimbursed at a rate that allows them 

to continue to offer those drugs? 

Secretary SEBELIUS. We do not have any flexibility with the sequester implementation. 

Mr. GREEN. And I understand that the sequester was brought on 

by Congress and we are tasked with finding a way out. On this 

Part B drug matter, my colleagues, both Mr. Whitfield on the majority side and Ms. DeGette and I have a bill that we have introduced for the last few sessions. This bill would exclude the prompt 

payment discount from the ASP calculation. 

And Mr. Chairman, I think we should seriously consider taking 

this bill up in our committee to mitigate the problems I have described, and again, I will yield back 43 seconds to you. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the gentleman from Kentucky, Mr. Guthrie, 5 minutes for questions. 

Mr. GUTHRIE. Thank you, Mr. Chairman, and thank you, Madam 

Secretary, for coming today. I appreciate you being here. 

I want to talk about prevention funds in the budget or the use 

of prevention funds, and I have been to a dialysis center. As you 

walk through, and it is not just the numbers of the money we are 

spending in dialysis centers, it is the lives, and a lot of that is preventable. So I am for prevention. The last time you were here, we 

spoke specifically about using prevention funds for lobbying State 

and local ordinances. 

Secretary SEBELIUS. I am sorry. Could I interrupt for one second? 

Dr. Cassidy, I have just learned that the rulemaking that I mentioned, it goes out tomorrow, so I just wanted to clarify. It isn’t out 

the door yet but it goes out tomorrow. I am so sorry. 

Mr. GUTHRIE. No problem. The prevention funds we talked about 

last time, and I remember you saying that the examples I cited 

were State and local lobbying so therefore it wasn’t lobbying as prevented by the federal. It was only limited to the federal government, which that actually wasn’t accurate according to the law. 

The second thing that you said that the grants that I cited went 

out prior to the Labor and HHS rider in the appropriations bill, 

therefore, it wasn’t covered by the lobbying prevention, but actually 

18 U.S.C. governed it as well, and we talked about that, and your 

own internal regulation A.R. 12 governs that. And so after that exchange, I thought you would go back and look at the programs and 

say OK, these would be covered by those, and I was even interviewed. I don’t have the transcript but somebody asked me about 

the Department. I said I have all faith that they are going to go 

back and correct the way these grantees are behaving, and I don’t 

think they behaving incorrectly to themselves because their actual 

grant proposals stated exactly what they were doing. So I sent a 

39 

letter along with Congressman Whitfield, and the letter came back 

and it concerned me because it said the HHS staff has determined 

that they believe the activities are not lobbying, and what is frustrating about it, it appears, it is like, OK, these groups were advocating for local and State policy. They put it in their grant requests, and let us find some interpretation of the law that allows 

them to do it, and the letter quoted a 1989 DOJ interpretation of 

18 U.S. Code 1913 that was updated in 1992. So we have a 1989 

interpretation of a law dated in 1992. And even your own A.R. 12 

says any activity designed to influence action in regard to a particular piece of pending legislation would be considered lobbying, 

and it says federal or State levels—so it just seems like we did 

bring this up and brought it to your attention and you said you 

would address it, and then we are back here now saying well, that 

really didn’t violate, we have an interpretation and they can continue to go the way that they were going. And that was frustrating 

to me because I thought we were going to be able to address that. 

Secretary SEBELIUS. Well, Congressman, I can tell you that CDC, 

the Centers for Disease Control and Prevention, takes their rider 

that Congress added to the legislation and the provisions that govern the anti-lobbying seriously. They have revisited the grantees. 

They have put out new technical assistance. They are proceeding 

to inform people as the money goes out the door, there is now language that goes with every grant that a grantee has to sign which 

reminds them about the prohibition to do lobbying at the State, 

local or federal level. So we are trying to be very responsive to both 

the Congress direction and the original law. 

Mr. GUTHRIE. But it is not just—but if you don’t define what 

they are doing as lobbying, then they can continue to move forward. 

There was one in South Carolina, you said—well, you didn’t say 

but the letter we got, there was a South Carolina one that was 

noted as a violation, and it said they sent email message and 

scheduled a press conference for purpose of getting a city ordinance, but there was one that wasn’t. It was Nevada that said they 

advocated for the passage of Senate Bill 27, and so we just want 

to make sure we know that lobbying, according to the regulation, 

is any activity, not just if it is large scale of heavily funded. That 

is what the interpretation of 1989 says. I guess that is what was 

disappointed. We thought we were going to get that addressed, and 

when the letter that I received back, and I am sure you have it, 

was that that really didn’t violate the law or not. 

Secretary SEBELIUS. Well, again, I think CDC takes those responsibilities seriously and we are trying to make sure that grantees do too. 

Mr. GUTHRIE. And then the letter was about a year late coming 

back—not a year late. It was a year later, so for oversight, it would 

be better if we could do it more promptly. I appreciate that very 

much. 

Mr. PITTS. The gentleman’s time is expired. The chair recognizes 

the gentlelady from the Virgin Islands, Dr. Christensen, 5 minutes 

for questions. 

Mrs. CHRISTENSEN. Thank you, Mr. Chairman, and welcome, 

Madam Secretary. Let me just say before I ask my questions, the 

40 

country is very fortunate to have you as Secretary at this particular time, not only bringing your experience as governor but insurance commissioner as we implement the Affordable Care Act. 

I am going to try to ask my questions all at once in the interest 

of trying to get through my 5 minutes. We have the first-ever national strategy to eliminate health disparities, and we thank you 

for that, but it relies heavily on the Offices of Minority Health, 

both the one in your office and the other agencies. So what I would 

like to know is, how does your budget and how do your plans support strengthening the Offices of Minority Health and supporting 

and funding those in the other agencies. 

The second one is on REACH. REACH has been widely documented as being extremely effective—the Racial and Ethnic Approaches to Community Health—in eliminating or reducing health 

disparities, and I know that the Department thinks that the community transformation grants and the community putting prevention to work initiative are good replacements, or that is what I understand the Department thinks. But looking at the increasing 

health disparities in communities of color, I think that that requires some specific targeted attention, and so I would like to know 

what evidence the Department has that supports that those would 

be good programs to replace REACH, which we don’t think they 

are. There is a non-discrimination provision in the Affordable Care 

Act and we would like to know when the regulations for that will 

be issued. 

Two more, one concerning the Navigator program. Why does it 

only reimburse for recruiting for exchanges and not for enrollment 

in Medicaid? That is one question on that. And also, there is a 

great concern that organizations from inside the communities that 

are going to be approached by the navigators are the ones that 

would be receiving the grants. We have experience with the Minority Age Initiative where organizations from outside communities 

came in, and they don’t have the trust of the communities so we 

want to be assured of that. 

And the last one is, how are we doing with the health care workforce? As a physician, I am particularly interested in physicians. 

For example, the Department projects that urologists would be facing a 32 percent deficiency in the number of providers needed in 

2030. 

So that is OMH, REACH, Navigator program, adequacy of the 

workforce, and non-discrimination provisions. 

Secretary SEBELIUS. Well, Congresswoman, you know that I 

share your keen interest in not only documenting health disparities 

but closing them. I don’t think there is any question that the full 

implementation of the Affordable Care Act with Medicaid expansion and affordable health insurance is probably the single biggest 

step we can take to addressing health disparities and so we are 

eager to work with you on that full implementation. I know that 

there is question about resource allocation to REACH and to other 

programs. We have targeted the community transformation 

projects in areas where there are large numbers of health disparities as part of the criteria for doing this and actually in a better 

budget time I think we would fund everything but we had to pick 

and choose and make some decisions going forward. But again, I 

41 

think the combination of the implementation and the specific community projects aimed at communities of color and the National 

HIV/AIDS Strategy which, again, is targeting for the first time resources to those most in need have great potential for moving forward. Health homes around chronic conditions is another area, I 

think, that isn’t look at as health disparities but will actually impact communities of color significantly. 

We share your concern about navigators coming from the community, being of the community, and that will be part of the criteria looked at as those funding proposals come in, and you will see 

in the 2014 budget request for resources, particularly in HRSA but 

also now with the mental health professionals to not only enhance 

workforce nurse practitioners, physicians assistants, more National 

Health Service Corps folks but also 5,000 mental health workers, 

which are part of the President’s Now is the Time agenda, so we 

are keeping a keen eye on workforce issues. 

Mr. PITTS. The chair thanks the gentlelady and now recognize 

the gentleman from Virginia, Mr. Griffith, 5 minutes for questions. 

Mr. GRIFFITH. Thank you, Mr. Chairman. Thank you, Madam 

Secretary, for being here. 

In an address to the Democratic National Committee in September 2012, you stated first if you already have insurance you 

like, you can keep it. Madam Secretary, I hear from constituents 

every week lamenting the fact that they have lost or at risk of losing their employer health insurance plan that they like because of 

Obamacare, and here is the dilemma that many business folks are 

being put into. A constituent of mine called me and sat down with 

his accountants and his experts and his medical people, and what 

they said to him was, you have three choices. The business that 

you have owned for 33 years that you started out with small and 

started growing and growing, you have 59 employees, so here are 

your choices. You pay the $43,000 fine, you close down the third 

shift that is the least profitable of your three shifts, just get rid of 

that and then you don’t have to do anything, or you pay even more 

than the $43,000 to insure all of your employees. Now, most of his 

employees are already covered or a large number of his employees 

he already pays for them, and he pays for them in full, and he is 

struggling with these dilemmas, knowing that some of his people 

won’t be able to afford the insurance that he is already paying for 

if he drops it completely, and he has not made a decision, but that 

is the dilemma that businessmen and women across the United 

States are having to go through. 

And again at the DNC you said but for us Democrats, 

Obamacare is a badge of honor because no matter who you are, 

what stage of life you are in, this law is a good thing. And I have 

to ask you, can you really believe that to the 7,000 employees who 

are part-time employees for the Commonwealth of Virginia who are 

facing a cutback in the number of hours because the Commonwealth has decided based on trying to make sure that they keep 

their costs in control that they are not going to allow the part-time 

employees to have more than 29 hours, do you really believe that 

to those people it is a badge of honor or that Obamacare is a good 

thing? Because now their hours are going to be cut. Yes or no. 

42 

Secretary SEBELIUS. Well, sir, I don’t like anybody’s hours to be 

cut. We need to actually make sure that people get paid and work 

to take care of their families—— 

Mr. GRIFFITH. But you do understand—— 

Secretary SEBELIUS [continuing]. But health costs are part of 

that overall—— 

Mr. GRIFFITH. I have to move on because I only have a limited 

amount of time, but the examples go on. In my district, we have 

a county, Wythe County, Virginia. They hire retired law enforcement folks to work court security as court security employees. Now, 

many of these people already have insurance. They are usually retired, or a lot of them are. They have insurance or they have Medicare. Now the county is going to have to cut back their hours because they don’t want to have to pick up insurance for people who 

already have insurance, and so they are going to have to cut back 

their hours, and for many of that folks, that translates into a 30 

percent pay cut for their retirees. I don’t believe that is a good 

thing, and I will take your previous answer as the answer to that 

question as well, that you hate to see that happen but sometimes 

things happen. 

And do you really believe that the 30-year-old—— 

Secretary SEBELIUS. Sir, I didn’t answer any question that way. 

Mr. GRIFFITH [continuing]. Whose premiums will skyrocket next 

year, do you think he thinks that Obamacare is a good thing? And 

how about my 82—I have to keep going because my time is running out. How about my 82-year-old mother enrolled in a Medicare 

Advantage program, which is a highly popular program, which has 

been cut to pay for the ACA, can you really believe—deep down in 

your heart, can you really believe that she thinks Obamacare is a 

good thing? 

Secretary SEBELIUS. The good news, your mother is paying less 

now than she did. I don’t know about your mother’s plan but Medicare Advantage plans are down 10 percent, enrollment is up almost 

20 percent, so your mother actually is in better shape than she was 

before the Affordable Care Act. 

Mr. GRIFFITH. Well, and she also got a lot of her stuff done. 

When she saw this coming down the pike, she said anything that 

I know is wrong with me now, I am getting it fixed. And how about 

Susan Zurface, the 42-year-old single mother who was recently diagnosed with leukemia and turned away from enrollment in the 

High Risk Pool program because the ACA established fund was depleted? I can’t believe that she thinks that Obamacare is a good 

thing. 

Secretary SEBELIUS. If repeal had gone forward, there would be 

no preexisting plan whatsoever. 

Mr. GRIFFITH. And what I would have to say, Madam Secretary, 

is that for so many of these folks who are facing uncertainty as to 

what is going to happen, who may not be able to pay, the employers who like to pay for their long-term employees who may not be 

able to afford to do that. They don’t think Obamacare is a good 

thing. They don’t see it as a badge of honor. I have to tell you, 

Madam Secretary, and I know we disagree on this, but when I talk 

to my constituents, it appears to me that thinking that Obamacare 

is a good thing and is a badge of honor is just wrong thinking, and 

43 

in fact, I believe it is going to make a majority of Americans losers 

in the health care arena. 

Mr. Chairman, I thank you so much for the opportunity and I 

yield back. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the gentlelady from Florida, Ms. Castor, 5 minutes for questions. 

Ms. CASTOR. Thank you, Mr. Chairman, and welcome. I want to 

thank you, Secretary Sebelius, and the President and your team 

here because what this budget does, it stays true to American families, especially our parents and grandparents that stay on Medicare. This is very interesting what my colleague has raised because 

what we know about the Republican budget that was passed is 

their plan for Medicare is to turn it into a voucher. That doesn’t 

save anybody money. It simply shifts costs to the beneficiary, probably including the family members of my colleagues, and what it 

will do over time is really force Medicare to wither on the vine. 

Meanwhile, the contrast here with President Obama’s budget is it 

again strengthens Medicare, lengthens the life of the Medicare 

trust fund and does so in a smart way. It is something that we 

have all discussed, and that is, by moving from a fee-for-service 

system that has proven wasteful to a new value-based system. Did 

you all know that 10 percent of Medicare beneficiaries now are involved in these value-based coordinated-care models that are saving significant money? These are many times voluntary efforts by 

doctors and hospitals and health systems that have realized now 

that the way we deliver health care in America has to change. So 

that is the good news out of this budget. Sure, you can pick certain 

circumstances and with the implementation of the ACA there are 

a lot of challenges ahead, but we would do better by working together to make it happen for our families, to lengthen the life of 

the Medicare trust fund, not turn into a voucher. That is the Republican vision. And we haven’t even started on Medicaid because 

under the Republican budget for Medicaid, they in essence break 

the promise to our older neighbors and our parents and grandparents. What Medicaid means to me, I think of my neighbors 

down the street that are able to stay out of a nursing home because 

Medicaid has been there for them or at the end of their life they 

had to rely on skilled nursing, they could go there. But under the 

Republican budget, in contrast to this one before us, the Republicans in essence take that safety net away entirely. I mean, have 

you looked at the numbers of the Republican budget cuts when it 

comes to Medicaid? So I am sorry, I sat through budget hearings 

a few weeks ago and it is very apparent to me, so I am sorry, 

Madam Secretary to take up time that I wanted to ask questions 

on that. But there is a very important contrast in the visions for 

this country for our older neighbors, and if it is not apparent after 

looking at these budgets, then you all really need to do some studying. 

Madam Secretary, I want to change the subject a little because 

another piece of good news in this budget is a new innovative proposal that I think holds great promise for this country, and that 

is the new innovative plan for brain research, the collaboration 

with our academic institutions, the NIH, the private sector on 

brain research. This is an ambitious project that is necessary and 

44 

important to develop the tools now as we confront greater diagnosis 

of Alzheimer’s, mental illness, and others. Could you give us an 

outline of how this collaborative effort will work and your vision for 

the coming years here? 

Secretary SEBELIUS. Well, Congresswoman, I share your enthusiasm for this new frontier, and Dr. Collins, who is the head of the 

National Institutions of Health, has enthusiastically put together 

this plan with colleagues in the academic sector and the private 

sector, feeling that it is very much like the Human Genome Project, 

that we need to map the brain, we need to understand what is happening and what is not happening, and that will lead a much faster 

pathway to cures and identification of how to deal with everything 

from Alzheimer’s to autism and, as you say, very parts of mental 

illness. So there are certainly some federal government new resources. There are also private partners in foundations stepping 

up, academic researchers, and we put together what Dr. Collins describes as sort of the dream team, some of the foremost authorities 

at universities across this country who are going to be leading this 

initiative and effort. Also, our colleagues at the Department of Defense are very much involved because brain injury is one of the 

most significant impacts from the wars in Afghanistan and Iraq. 

Returning warriors are often suffering everything from post-traumatic stress syndrome to issues around the brain, so understanding what is going on and having ways to effectively deal with 

that, I think, help our entire country. 

Mr. PITTS. OK. The gentlelady’s time is expired. I now recognize 

the gentleman from Maryland, Mr. Bilirakis—or Florida. Mr. Bilirakis for 5 minutes. 

Mr. BILIRAKIS. Thank you very much. I appreciate it. Thank you, 

Madam Secretary, for being here. Thank you, Mr. Chairman. 

Madam Secretary, I am receiving calls, an increasing amount of 

calls and correspondence from my constituents who are concerned 

about what to expect in 2014 with regard to the ACA. Many are 

certain that the law means higher costs, increased taxes and less 

jobs. As a matter of fact, I have a tweet here from @TheKipWilson. 

She wants to know why middle-class workers are going to be subject to increased premiums and more taxes under Obamacare. I 

keep hearing that. 

Yesterday in your testimony before the Senate Finance Committee, your responses left one of the law’s leading architects to 

conclude that the implementation of this law might be ‘‘a train 

wreck.’’ I must tell you, that leaves me, my constituents and the 

American taxpayers with even less confidence that we had before 

the law was passed. I guess it is beginning, you are going to launch 

it October 1st. Secretary Sebelius, I want to give you an opportunity to respond to the questions yesterday by our Senate colleagues. With thousands of pages of regulations issued, hundreds 

of new Washington acronyms and uncertainty mounting, can the 

Department share a written timeline and implementation with this 

Committee and to the American people so they can better understand what the Administration’s intent is and what they can expect. If you can elaborate on that, I would appreciate it. 

Secretary SEBELIUS. Yes, sir. What I said yesterday and here 

today and will continue to say is, starting October 1st in every 

45 

State in the country, new marketplaces will be available for open 

enrollment. Some of those will be federal marketplaces but contain 

private market plans, choices and competition, and some are going 

to be run by the States in advance of that. Hopefully this summer 

there will be individuals trained to answer questions and do outreach so people can become aware of what is developing and the 

choices they can make for themselves and their family. There is an 

up-and-running Web site with a very clear timeline, healthcare.gov, 

which gives steps along the way. We will have open enrollment by 

October 1st where people by Web site or on paper can pre-enroll 

in plans that will be up and running on January 1, 2014, in every 

State in the country. 

Mr. BILIRAKIS. What about again the tweet that I just received 

from @TheKipWilson? Are we going to be subject to increased premiums and higher taxes under Obamacare? 

Secretary SEBELIUS. Well, the insurers right now, Congressman, 

are just beginning to file their planned rates for the new marketplaces. There is then a negotiation period either at the State level 

or with the federal marketplaces about what those rates are, so I 

think any description of what people will be paying I think is just 

invented at this point. The rates are not filed, they are not certain, 

and we are very confident that not from our standpoint but from 

the Congressional Budget Office analysis that the combination of 

competition, elimination of a lot of the overhead costs and subsidies 

available to a lot of these Americans who for the first time will 

have full insurance coverage, they will be looking at a much more 

competitive rate and lower prices than they are paying right now 

if they have insurance coverage. 

Mr. BILIRAKIS. So you don’t anticipate increased premiums under 

Obamacare? 

Secretary SEBELIUS. I do not anticipate the kind of rate shock 

that people are describing, and again, there are no rates filed so 

anyone who is giving quotes about what rates will be paid is just 

really inventing that. 

Mr. BILIRAKIS. Thank you, Madam Secretary. Next question. According to reports, HHS believes it has the authority to shift money 

from certain accounts to fund any remaining expenses related to 

implementation of the new health care law, specifically from any 

non-reoccurring expense fund. Yes or no, do you believe you have 

such authority to shift funds between HHS accounts to cover expenses related to implementation of the health care law? Yes or no, 

please. 

Secretary SEBELIUS. I do have legal transfer authority that is 

part of and it is limited. The non-recurring expense fund is a specific Congress that established within the Department of Health 

and Human Services that is for one-time IT costs, so those are two 

different things. 

Mr. BILIRAKIS. Can you please provide a list of the authorized accounts you believe you have the ability to use to make such transfers for implementation purposes and accounting of what funds 

have been transferred or used for such purposes and also the legal 

analysis for such authority? 

Secretary SEBELIUS. Yes. 

Mr. BILIRAKIS. Thank you very much. I yield back. 

46 

Mr. PITTS. The gentleman’s time has expired. 

We are voting on the floor. We have 8 minutes plus before the 

vote ends. I would like to ask the members if they can be as concise 

as possible. Everybody can then ask a question or two. And the 

gentleman from New York, Mr. Engel, is recognized. 

Mr. ENGEL. Thank you, Mr. Chairman. Madam Secretary, I have 

watched you as you have been Secretary. You have done an outstanding job, and your testimony here today just continues it, so 

thank you very much for the job you are doing. 

I am from New York, and many New York hospitals are working 

hard to move toward more effective and efficient systems by participating in ACOs and bundled payment programs. The reality is, 

these reforms are going to take many years to fully implement. In 

the meantime, I think there needs to be a recognition that funding 

streams such as GME DSH or bad-debt payments are essential for 

hospitals investing in delivery system or form. Hospitals need these 

various funding streams to treat those who will remain uninsured 

even after the ACA and train our next generation of physicians. Of 

course, in New York we train a lot of physicians. So in the face of 

significant cuts year after year, it adds another layer of certainty 

to a rapidly evolving and challenging health care system for our 

hospitals. So Madam Secretary, what is HHS doing to help ensure 

our Nation’s hospitals have the resources, stability and flexibility 

they need for the coverage expansions included in the ACA as well 

as move toward providing higher quality, more coordinated care? 

Secretary SEBELIUS. Well, we are working very closely with hospital leaders across the country who are key health care leaders, 

and I think what is incredibly impressive is the amount of transformative care underway, trying to get to a higher quality of care 

for every patient and deliver it at an affordable cost. I think it is 

also very good news that the President has nominated Marilyn 

Tavner, who not only was a practicing nurse but ran hospital systems and is very closely attuned to the needs and economics of hospital care moving forward. She has been nominated to be the Administrator of the Centers for Medicare and Medicaid Services, and 

we are hoping that she will be confirmed shortly. 

Mr. ENGEL. Thank you. Let me ask you one other quick question 

and I will yield back some of my time, as the chairman asked. I 

was very pleased with this Administration’s efforts to develop and 

implement a national HIV/AIDS strategy. It is a roadmap to help 

us reach the point where new HIV infections are rare, and when 

they do occur, every person has access to high-quality treatment. 

We have made strides forward, but with approximately 50,000 new 

HIV infections each year, we still have a long way to go. As a member of this committee and as ranking member on the House Foreign Affairs Committee, I have had the opportunity to work on legislation that has made a significant impact in the fight against HIV 

and AIDS. 

The President’s budget recognizes the critical role played by the 

Centers for Disease Control in preventing new HIV infections and 

monitoring the epidemic and also directs vital treatment funding 

provided through the Ryan White program. So can you share with 

us how we are moving forward with the National HIV/AIDS StratVerDate Nov 24 2008 14:02 Jan 14, 2014 Jkt 037690 PO 00000 Frm 00052 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-33 CHRIS
47 

egy and how this strategy is reflected in the President’s budget priorities? 

Secretary SEBELIUS. I think the President shares your commitment and concern and also the opportunity to really look forward 

to an AIDS-free generation in the future. So we are doing important research at NIH. We will continue and be part of the funding 

that NIH will hopefully receive through the allocations in the budget with the CDC work not only in communities throughout the 

United States but internationally has been hugely impactful and 

effective, and I think we certainly intend to continue that, and we 

have re-gathered resources and focused them on communities most 

at risk where the infection rate is the highest, where the transmission is still underway in an attempt to stop transmission, cut 

down on the number of new infections and really focus on communities that need not only initial testing but connection to treatment, and the Affordable Care Act again offers a huge step forward 

for a lot of patients right now who have been diagnosed and determined but do not have insurance coverage to move forward with 

ongoing treatment. 

Mr. ENGEL. Thank you, Mr. Chairman. I yield back. 

Mr. PITTS. The chair thanks the gentleman and he yields back 

27 seconds. And I might say, I was just notified that Mr. Griffith’s 

mother just tweeted that her Medicare Advantage rates were just 

increased. 

Secretary SEBELIUS. I can give her a list of plans that she can 

look for an open enrollment that have gone down. 

Mr. PITTS. The chair recognizes the gentlelady from North Carolina, Ms. Ellmers. 

Mrs. ELLMERS. Thank you, Mr. Chairman, and Secretary 

Sebelius, thank you for being here, and I have a lot of questions 

for you so I am going to blow through this as quickly as possible, 

so if you can answer with a yes or no, that would be very, very 

helpful because I am being respectful of my colleagues. 

Number one: On April 5, the federal court issued a ruling requiring that the morning-after pill or Plan B pill can be available for 

all people of all ages including young adolescents. Do you plan to 

appeal this ruling? Yes or no. 

Secretary SEBELIUS. It isn’t a yes or no. I have no jurisdiction 

over a federal judge. 

Mrs. ELLMERS. OK. No jurisdiction, so you do not plan to approach this in any way? 

Secretary SEBELIUS. The Justice Department is currently evaluating an appeal. 

Mrs. ELLMERS. They are evaluating an appeal at this time, the 

Justice Department? 

Secretary SEBELIUS. Yes. That is not our jurisdiction. 

Mrs. ELLMERS. OK. Thank you. I would like to move on. You 

know, there again—— 

Secretary SEBELIUS. I would like answer your question. 

Ms. ELLMERS. No, I appreciate that, but I only have so many 

minutes. Now, there again, reaching out, the idea of the ACA, I 

have a constituent back home who just contacted my office 2 days 

ago. He has 200 employees. He cannot afford to provide health care 

for them at this time. He knows that he is going to be hit with a 

48 

$2,000-per-person penalty. He basically is saying look, 80 percent 

of my employees are minority, I will have to lay off 60 employees 

just to be able to deal with the penalty itself. In doing some research, doing some homework here, 61 percent increase in insurance rates in North Carolina, there will be a 61 percent. According 

to the Kaiser Family Foundation, for a family of 4, there will be 

a $5,600 for an insurance plan with, that is a 20 percent increase 

as a result of the ACA. My staff has done some research as well. 

For a plan for a family of four, the cost would be $271 per month 

with a $25,000 deductible. That is unbelievable. 

My question to you, ma’am, because you have talked about this 

ACA creating a thriving middle class, helping create jobs, does 

what I just laid out to you create a thriving middle class? Yes or 

no. 

Secretary SEBELIUS. There are no rates filed in the new marketplaces so I have no idea what you are quoting. 

Mrs. ELLMERS. As it is right now, so what you are saying is that 

the cost—— 

Secretary SEBELIUS. There is no implementation. 

Mrs. ELLMERS [continuing]. Of insurance would drop that drastically for a family? 

Secretary SEBELIUS. Ma’am, all I am telling you is, I have no 

idea what rates you are quoting but that is not an effect of the Affordable Care Act. 

Mrs. ELLMERS. The Kaiser Family Foundation. 

Secretary SEBELIUS. They may be quoting what is happening 

right now in the marketplace—— 

Mrs. ELLMERS. OK. Let us move on. I also had my staff reach 

out to the, as you stated it, a one-stop shop Web site. Incredibly, 

non-user-friendly, categorizes Medicaid for the poor, under 26, coop plans. There is one standard plan to compare anything to. How 

can anyone plan for the future, employees, individuals? How can 

anyone plan for the future? I know you keep citing the 2014 date. 

However, we live in real time. Americans are scared. 

Secretary SEBELIUS. And in real time, insurers are currently filing rates. Insurers are currently making their plans to come to the 

market. 

Mrs. ELLMERS. OK. Let us move on. I have a minute and 30 seconds. To the issue of the 2 percent sequester, there was an OMB 

memo that went out to federal agencies about the cut asking that 

life, safety and health of Americans be protected. Now, it is my understanding, I believe I heard you say that CMS has absolutely no 

ability to act on this, no ability to address the 2 percent cut. Yes 

or no. 

Secretary SEBELIUS. That is correct. 

Mrs. ELLMERS. As it is right now? 

Secretary SEBELIUS. Yes, that is correct. 

Mrs. ELLMERS. OK. The reason that I am asking is because right 

now as you know, there are cancer patients who are being turned 

away from community cancer centers who need their chemotherapy 

if they have Medicare. Is that correct? And you did—I did hear 

your Ways and Means testimony and you said that right now there 

are patients who are being turned away. 

49 

Secretary SEBELIUS. Part of the sequester was a 2 percent acrossthe-board cut for every division of CMS, every program, every category. That is what was implemented by the United States Congress. 

Mrs. ELLMERS. OK. And it affects physicians who are giving lifesaving treatments to patients, correct? Because it attacks the Part 

B. Yes or no. 

Secretary SEBELIUS. A 2 percent cut is in effect because of sequester, yes, ma’am. 

Ms. ELLMERS. Well, I would like you to know that I have a piece 

of legislation, H.R. 1416, that addresses this issue. There are families in crisis right now who have received an incredible devastating 

piece of information. However, I would like to further this by saying that the President’s budget actually increases that formula, decreases payment in reimbursement to those physicians by another 

1 percent. It makes it an ASP plus 3 percent rather than the 4.3 

percent. Are you aware of this? 

Secretary SEBELIUS. I am aware of it, but the way the President’s 

budget would be implemented is that there would be far more flexibility, which we did not have in the sequester, to actually—— 

Mrs. ELLMERS. And by flexibility, are you referring to the fact 

that the manufacturers would be required to provide the rebates as 

directed by the Secretary? Is that the flexibility we are talking 

about? 

Secretary SEBELIUS. No, we are talking about the ability to administer the administrative costs differently than the costs of the 

drug. The important thing is to—— 

Ms. ELLMERS. So you have that jurisdiction but you do not have 

jurisdiction to—— 

Secretary SEBELIUS. The way the sequester bill was written, 

Congresswoman, we were told to cut across the board every program, every category 2 percent for Medicare and that is what we 

did. 

Mrs. ELLMERS. Even though the OMB directed to protect life, 

safety and health? 

Secretary SEBELIUS. OMB directives don’t overrule Congress, and 

you passed a bill that—— 

Mr. PITTS. The gentlelady’s time is expired. 

Mrs. ELLMERS. Thank you. 

Mr. PITTS. I apologize for interrupting. The time has run out on 

the floor. We are going to try to wrap this up. The chair recognizes 

the gentleman from Maryland, Mr. Sarbanes. 

Mr. SARBANES. Thank you, Madam Secretary. I think you are 

doing a terrific job. It is a big challenge. We have run out of time 

all over the place on the floor, in this committee. You have to leave, 

I know. 

We had a hearing the other day with some representatives from 

the business community, and what became clear is, until the issue 

of whether implementation of the Affordable Care Act was going to 

go through was settled by the outcome of the election, there were, 

I think, many small businesses around the country that frankly I 

can understand this didn’t really take the time to learn the rules 

and regulations and what was coming down because they didn’t 

know whether it would be in place. What is happening, I think, is, 

50 

as they focus in on something about which they got a lot of misinformation over time, they are discovering to their relief that there 

really is a lot of support there for small businesses, and many of 

us were motivated to support the Affordable Care Act because of 

the relief we thought it would bring to small businesses across the 

country. 

I don’t have a question, but I just wanted to make a suggestion. 

I think it would be terrific, and I am sure that the Department is 

working on this, to sort of put together, you know, the 1040EZ 

version of what benefits are now going to be available to small 

businesses out there because they are primed now to be looking for 

that information, and I think we have provided them with accurate 

information about these opportunities. It will come as a relief to 

them, and they can really kind of invest in the opportunity that it 

presents. So I hope the Department is working on something like 

that that we can turn around and share with our constituents and 

small businesses across the country. 

Secretary SEBELIUS. We are working on it. We would be glad to 

provide it to you. And we are doing presentations with the colleagues in the Small Business Administration across this country. 

So we are happy to do a number of things. But you are absolutely 

right. I think a lot of the misinformation once it is corrected and 

people understand what the rules are and what is going to be 

available to small business owners who often are paying 15 to 20 

percent more for insurance right now, they are very pleased about 

what opportunities they may have. 

Mr. PITTS. The chair thanks the gentleman. I have been notified, 

the leader is holding the vote for us. We will have one follow-up. 

Dr. Burgess. 

Mr. BURGESS. Thanks for staying with us, Madam Secretary. Dr. 

Gingrey brought up the issue of contingencies. Gary Cohen in addressing the AHIP Foundation a couple of weeks ago brought up 

the issue of contingency. So you indicated this morning in your answer to Dr. Gingrey’s question, there are no contingency plans, and 

yet there is discussion that I am aware of, of people talking about 

actually narrowing the scope of the ACA. It is called descoping. So 

are you in your Department talking about descoping or narrowing 

the scope of ACA provisions? 

Secretary SEBELIUS. No, sir. 

Mr. BURGESS. Are you talking about work-around plans? 

Secretary SEBELIUS. No, we are not. We are moving ahead. We 

have the federal hub on track and on time. We are moving ahead 

with the marketplaces that we will be individually responsible for 

and we are working very closely with our State partners on their 

plans and their timetable for the State-based marketplaces. 

Mr. BURGESS. So the federal hub will be available? 

Secretary SEBELIUS. Yes. 

Mr. BURGESS. Unless it is not, and if it is not, you have no contingency plans. 

Secretary SEBELIUS. At this point, our energy and resources are 

focused on getting it up and running, and we are on track and the 

contracts have been led and we are monitoring it every step along 

the way. 

51 

Mr. BURGESS. Let me just say that if the promises that you will 

be ready and you are not, I think the United States Congress, 

which does hold the ability to fund things at the federal agencies, 

would have to look seriously about putting any other money into 

that exercise. You have had 3 years and billions of dollars. If you 

are not ready, I think the Congress needs to hold your agency accountable. 

Secretary SEBELIUS. Well, I appreciate that, Congressman. I 

think that the CBO analysis when the bill was passed was that we 

would need about $10 billion in implementation money. One billion 

dollars was appropriated. I can tell you we are on track. We have 

judiciously used those resources and we intend to be open for open 

enrollment around the country October 1st. 

Mr. BURGESS. Thank you, Mr. Chairman. I will yield back. 

Mr. PITTS. The chair thanks the gentleman, and thank you, 

Madam Secretary, for your time. 

As we move closer to implementation and enrollment in the exchanges, could you please agree to come before the committee again 

before October 1st? 

Secretary SEBELIUS. We will make every effort. 

Mr. PITTS. Thank you, Madam Secretary. We appreciate your information, your testimony today. 

If members have additional questions, I will ask them to submit 

the questions and we will send them to you immediately. We ask 

that you please respond promptly to the questions. Members 

should submit their questions by the close of business on Thursday, 

May 2nd. 

Thank you very much, Madam Secretary. You have been very 

generous with your time. Without objection, the subcommittee is 

adjourned. 

[Whereupon, at 12:10 p.m., the Subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

52 


82186.009

FRED UPTON, MICHIGAN 

CIIAIf1MAN 

HeNRY A, WAXMAN, CALIFORNIA 

RANKING MEMBER 

ONE HUNDRED THIRTEENTH CONGRESS 

{(ongre55 of tUt llnfteb ~tatt5 

~ollnt of i-\epre1ientatjbcs 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HOUSE OFFICE BUILDING 

WASHINGTON, DC 20515-6115 Majority 

Mil'1mity 

June 5, 2013 

The Honorable Kathleen Scbclius 

Secrctary 

U,S. Department of Health and 1·luman Services 

200 Independence Avenue, S,W, 

Washington, D,C, 20101 

Dear Madrun Secretary: 

Thank you for appearing before the Subcommittee on Health on Thursday. April 18, 2013 to 

testify at the hearing entitled "A Financial Review of the Department ofl !ealth and llnman Services and 

lts FY 2014 Budget." 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record remains 

open to penni! Members to submit additional questions for the record, which are attached, 11le [onua! of 

your responses to these questions should be as follows: (I) the nruue of the Member whose question you 

are addressing, (2) the complete text ofthe question you are addressing in bold, and (3) your answer to 

that question in plain text. 

Also attached are Member requests made during the hearing, The fO!Tuat of your responses 10 

these requests should follow the same fonua! as your responses 10 the additional questions for the record, 

To facilitate the printing of tile hearing record, please respond to these questions and requests by 

the close of business on Wednesday, June 19,2013, Your responses should he e-mailed to the Legislative 

Clerk in Word format at Svdl1e,Harwick(ti)l11ail.house,~ and mailed to Sydnc Harwick, Legislative 

Clerk, Committee on Energy and Commerce, 2125 Raybunl House Office Building, Washington, D,C,. 

20515. 

Thank you again for your time and ctTort preparing and delivering testimony before the 

Subcommittee, 

Sincerely, ? fa 

Pitts 

cc: The Honorable Frank Pallone, Jr., Ranking Member, Subcoml11iuee 011 Health 

Attachments 
53 


82186.010

Secretary Sebelius Questions for the Record 

House Energy & Commerce Subcommittee on Health 

April 18, 2013 

The Honorable Joseph R. Pitts 

1. Would you support legislation that places HHS employees in the exchanges? 

Answer: The Health Insurance Marketplaces are modeled after the Federal Employees Health 

Benefits Program (FEHB) where most HHS employees currently obtain health insurance. Like 

the FEHB, which permits federal employees to choose from various health benefits coverage 

options, the Marketplaces will allow individuals and small businesses to shop for a variety of 

affordable health insurance plans that provide comprehensive benefits. Current law does not 

allow for Federal Executive Branch agencies to provide health insurance coverage to their 

employees by contributing to coverage obtained through the Marketplaces. 

2. As you know GAO and MedPAC have examined the in-offiee ancillary Service 

Exception in depth and neither gronp has recommended repealing IOASE. I am 

concerned that the Administration's proposal would result in more patients receiving 

care in the more expensive hospital setting, thus undermiuing an integrated delivery of 

care and lead to more hospital acquisitions of physician practices. 

Would you provide the quantitative analysis that supports the $6 billion score for the 

proposal? How much is attributable to each service? 

Answer: The estimate of $6 billion in savings over 10 years was developed by the independent 

eMS Office of the Actuary based on its assumptions about predicted reductions in spending on 

services and behavioral changes related to the policy. 

3. With regard to radiation, are you aware that radiation utilization from 2007-2011 has 

been flat at the precise time physician offices have acquired the IMRT technology? 

Doesn't that suggest that there would be no savings from prohibiting physician 

ownership of radiation? 

Answer: The in-office ancillary services exception was intended to allow physicians to selfrefer for services to be performed by their group practices for patient convenience. While there 

are many appropriate uses for this exception, evidence suggests that this exception may have 

resulted in overutilization and rapid growth of certain services over time, including radiation 

therapy. Effective calendar year 2015, this proposal would seek to encourage more appropriate 

use of select services by amending the in-office ancillary services exception to prohibit certain 

referrals for radiation therapy, therapy services, and advanccd imaging, except in cases where a 

practice meets certain accountability standards, as defined by the Secretary. 
54 


82186.011

4. The President's budget would equalize payment rates for certain conditions that can be 

treated in both rehabilitation facilities and skilled nursing facilities. In the budget brief, 

this balancing of payment rates is described as "improving financial incentives to 

encourage efficient and appropriate provision of care by reducing the disparity in 

Medicare payment rates between settings." Please explain what the President hopes to 

accomplish by this? 

Answer: Currently, treatment of certain knee, hip and pulmonary conditions that do not require 

intensive therapeutic post-acute care can be performed in either an inpatient rehabilitation facility 

(IRF) or a skilled nursing facility (SNF), but Medicare payments are much higher if the treatment 

occurs in an IRF. This proposal would encourage care delivery in the most clinically appropriate 

and cost-effective setting. It would, beginning in 2014, reduce the differences among settings in 

Medicare payments for certain knee, hip, and pulmonary conditions, as well as other conditions 

selected by the Secretary. 

5. The proposed budget would also implement bundled payments - beginning in 2018 - for 

post-acute care providers including long term care hospitals, and home health 

providers. Has your department already begun work to prepare for implementation 

and, if so, would you please describe such work? If not, how do you envision such a roll 

out in 2018? 

Answer: The President's FY 2014 budget includes a proposal to implement bundled payment 

for post-acute care providers, including long-term care hospitals (L TCHs), inpatient 

rehabilitation facilities (IRFs), skilled nursing facilities (SNFs), and home health providers, 

beginning in 2018. Payments would be bundled for at least half of the total payments made to 

post-acute eare providers. The Secretary would specify the payment rate for an episode of care 

based on patient characteristics that covers the cost of all SNF, LTCH, IRF, and home health 

services. The Secretary has the authority to adjust payments based on quality of care, geographic 

differences in labor and other costs, and other factors as deemed appropriate. 

Payments for a bundled episode of care would be reduced 0.95% in each of the years 2018, 2019, 

and 2020, with a 2.85% cumulative reduction by 2020. Beneficiary coinsurance levels would 

remain the same as those under current law (for instance, to the extent beneficiaries use SNF 

services, they would be responsible for the current law copayment rate). 

CMS is interested in hearing from stakeholders about the implementation of this proposal and, 

chose the implementation date of2018 so that CMS would have adequate time to prepare and 

apply lessons learned from the Center for Medicare and Medicaid Innovation's Bundled 

Payments for Care Improvement Initiative, which began earlier this year. 

6. Today, hospitals receive reimbursement from the federal government for bad debts. 

Changes were made in PPACA to lower that amount to 65% of the total bad debt 

amount a hospital incurs. The proposed budget would seek to further reduce this 

amount by 25% (to 40%). Can you explain the rationale behind this change'! 

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Answer: The National Commission on Fiscal Responsibility recommended gradually putting an 

end to payment for Medicare bad debt. Congress' s action last year to reduce coverage of bad 

debt to 65% for all entities represented an important first step towards aligning Medicare's bad 

debt policy with private sector practices. However, even after this change, Medicare's 

reimbursement of bad debt remains unusually generous. We believe making further adjustments 

constitutes a smart, targeted approach to achieve further Medicare savings. 

7. The Office of Management and Budget (OMB) directed all federal agencies to "use any 

available flexibility to reduce operational risks and minimize impacts on the agency's 

core mission in service of the American people" and to "identify and address 

operational challenges that could potentially have a significant deleterious effect on the 

agency's mission or otherwise raise life, safety, or health concerns." 

On what legal opinion did HHS base its decision to apply the 2 percent cut to ASP? 

Answer: Based on an assessment conducted by the Department of Health and Human Services 

(HHS), we do not have the authority to exempt Medicare payment for Part B drugs under the 

Budget Control Act of 2011. The sequestration exemptions. which are specified in 2 U .S.C. 

sections 905 and 906, do not apply to payment for Medicare Part B drugs. 

8. Does HHS believe applying the sequester three times to an oncologist's payments will 

raise life, safety or health concerns? If so, why hasn't HHS used its discretion to 

modify the sequester with respect to reimbursement for cancer treatment? 

Answer: We do not have the authority to exempt Medicare Part B drug payments from the 

sequestration cut. We share your concern about the potential adverse impacts of the payment cuts 

mandated by sequestration. We will continue to monitor the impact of provider payment cuts 

mandated under the Budget Control Act to assess their impact on Medicare beneficiaries and we 

are happy to share our results. 

9. Open enrollment in the Health Insurancc Marketplace (State Exchanges) 

begins October 1,2013. Will individuals shopping in these state marketplaces have 

complete transparency to and the ability to compare options for cost and availability of 

medical and pharmaceutical coverage? 

Answer: Yes, Marketplaces will make purchasing private health insurance easier by providing 

qualified individuals and qualified employers with one-stop shopping where they can choose 

qualified health plans that best fit their needs. Specifically the Marketplace will allow consumers 

to: 

• Shop for private health insurance with comprehensive benefits 
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• See what their premium. deductibles, and out-of-pocket costs will be before they decide 

to enroll 

• Make apples-to-apples comparisons of costs and coverage between health insurance plans 

• Find out if they qualify for premium tax credits to help lower the costs of their monthly 

premiums, and cost-sharing reductions to lower their out-of-pocket expenses 

• Learn if they can get free or low-cost coverage from Medicaid or CHIP 

10. In response to reports from AHRQ and MedPAC regarding the health savings 

generated by Comprehensive Medication Management and Medication Therapy 

Management (CMMfMTM), will HHS commit to supporting a CMMlMTM component 

within Medicare? 

Answer: Under the MMA, Part D plan sponsors were required to establish MTM programs to 

optimize therapeutic outcomes for targeted Part D beneficiaries through improved medication 

use. The initial CMS regulations established few requirements and a general framework that 

allowed sponsors flexibility to promote best practices. After an extensive analysis of the 

industry's best practices, the requirements were expanded in 20 I 0 for increased consistency 

among plans. and CMS pushed the industry forward. Significant changes were made to the 

targeting criteria and CMS required a minimum level of MTM services that must be offered to 

the Part D beneficiaries who qualify for these programs. Additionally, Section 10328 of the ACA 

specified changes to Part D MTM programs to further strengthen the MTM programs offered to 

Part D beneficiaries. For the coming years, we expect increased standardization and industry 

consensus. CMS would like to expand access to better target the beneficiaries who most need 

MTM. In addition, through expanded data collection, we want to be better positioned to evaluate 

the impact of MTM at the beneficiary level. 

11. Your administration has raised many expectations that PPACA will improve the health 

of Americans, because health insurance will im prove access to health care. An 

important factor in health care access and delivery is the size of the healthcare 

workforce, which is currently inadequate. Would you explain why in the proposed 

HRSA budget, funding for Health Workforce and Children's Hospital GME has been 

reduced? And, would you explain who would provide the care in all those new 

community health centers that will be funded? 

Answer: With regard to the CHGME program, while the program has benefited many facilities 

across the country, we are working within the context of a budget that requires tough choices. A 

challenging budget environment required a closer examination of how resources are spent. The 

FY 2014 budget provides $88 million to fund the CHGME payment. This funding is adequate to 

support expenses that directly support the residents and faculty so that training of pediatricians 

and other medical specialties can continue, but does not provide funding for the indirect costs. 

Our investments in the health care workforce reflect our efforts to ensure Americans have access 

to health care in their communities. As a result of historic investments by both the Recovery Act 

and the Atlordable Care Act the numbers of primary care providers in the National Health 

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Service Corps (NHSC) arc at all-time highs, nearly tripling between 2008 and 2012. Today. 10.4 

million people in communities nationwide receive health care from nearly 10.000 National 

Health Service Corps clinicians. The National Health Service Corps has invested nearly $900 

million in providing scholarship and loan repayment incentives to primary care providers and 

students in return for service in underserved areas, including many community health centers that 

serve those areas. 

12. In the proposed HHS budget, the discretionary funding for the Vaccines for Children 

and the Breast and Cervical Cancer Program is reduced to reflect expanded access to 

health insurance. Yet funding increased for other programs, such as Ryan White and 

Family Planning that will also be affected by the expansion. Would you explain why, in 

this fiscal environment, these programs were not only spared from cuts, but received 

increases? 

Answer: The FY 2014 budget request reflects continued support for the Ryan White HIV/AIDS 

Program (RWHAP) while HHS conducts an in-depth assessment of the interaction between the 

Affordable Care Act and RWHAP's continued provision of HI V services, and the potential for 

achieving one of the National HIV/AIDS Strategy's key goals: improving health outcomes for 

people living with HIV/AIDS. 

While HHS does not expect a significant shift in the demand for clinical services in FY 2014, 

nonetheless, in FY 2014, the number of insured Ryan White cl ients is expected to increase to 

some extent. The FY 2014 Budget also supports Ryan White funded services not covered by 

public or private insurance. but which are essential to linking people living with HIV into care 

and maintaining them on drug regimens. These "continuum of care" services are critical to 

preventing the sprcad of the domestic HlV epidemic as recent studies have found that antiretroviral (ARV) treatment reduces HIV transmission by 96 percent. Examples of these services 

include case management, transportation assistance, and treatment adherence, which are critical 

to keeping people in care and on drug regimens that decrease viral load and prevent the spread of 

the virus. Ryan White dollars are also used to support cost sharing, which leads to more 

consistent access to ARV drugs and increased adherence to treatment. Ryan white grants are also 

used by clinics to fund several core medical services not consistently covered by insurance, 

including comprehensive substance use treatment, mental health services, and care coordination 

services. 

The FY 2014 budget request also reflects continued support for the Title X Family Planning 

program, which provides community-based preventive health services, including family 

planning, to approximately 5 million individuals annually. the majority of whom are low-income 

and uninsured. Services range from the provision of FDA-approved contraceptive methods to 

cervical and breast cancer screening to a host of other preventive health screenings. Title X 

services sites arc considered the usual source of medical care for six in 10 women who seek 

services through them. The Title X program accomplishes its mission in a highly efficient 

manner, and are estimated to provide $5.3 billion in government savings. Studies have found that 

for each dollar invested in the program, approximately $5.68 is saved, through averting costs to 

Medicaid for prenatal care, delivery. and postpartum and infant care. 
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13. To the American public and Congress, the Prevention and Public Health Funds appears 

like your own personal slush fund. Since 2010, we learned that the first wave of funding 

was used by States to fund lobbying, park sign age, dog neutering, and other 

questionable activities. By 2012, the fund has morphed into a budgetary tool to prop up 

discretionary programs or Obamacare implementation. Instead, would you support 

directing these funds to help patients with pre-existing conditions? Don't these 

Americans deserve to get the relief that this administration promised them? 

Answer: The Prevention and Public Health Fund (PPHF) has been used to fund important 

investments in our nation's health, including improvements in our ability to immunize children, 

reduce health-care acquired infections, improve laboratory systems at the state level, and detect 

and respond to disease outbreaks. The PPHF also supports the Community Transformation Grant 

(CTG) program. which supports evidence and practice-based efforts in states and communities to 

reduce chronic diseases. Awardees are addressing the priority areas of 1) tobacco-free living; 2) 

active living and healthy eating; and 3) high quality clinical and other preventive services, 

including prevention and control of high blood pressure and high cholesterol. 

HHS remains committed to proper oversight and monitoring of appropriated funds, and to 

awardees' compliance with all applicable regulations and statutes. HHS awardees, including 

those in the CTG programs, are informed about the applicable federal laws, regulations. and 

policies relating to the use of federal funds. including applicable anti-lobbying provisions. 

The Administration strongly supports policies that ensure all Americans with pre-existing 

conditions have access to affordable health care. This is why the Affordable Care Act banned 

insurance companies from charging more or excluding coverage based on an individual's preexisting condition starting in 2014. It is also why the health care law adopted the PCIP Program 

to provide a bridge to the new system between 2010 and 2014. 

The PPHF provides for expanded and sustained national investment in prevention and public 

health programs to improve health and help restrain the rate of growth in private and public 

sector health care costs. Assisting Americans in gaining affordable health care aligns with the 

purpose of the funds, which may be used for prevention, well ness, and public health activities. 

Implementing the Health Insurance Marketplace is the Administration's top puhlic health 

activity. which has large potential to improve prevention in the next year by enabling individuals 

to enroll in coverage through private health insurance. The FY 2013 allocation reflects a broad 

and strategic portfolio of activities that supports the Administration's highest prevention and 

public health priorities. 

14. Our nation continues to faccs serious national security threats, and the need remains to 

protect the American people against chemical, biological, radiological and nuclear 

(CBRN) events. What impact has the availability of the Project BioShicld Special 

Reserve Fund had on the development and procurement of medical countermeasures 

for national security threats over the past decade? 

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Answer: Project BioShield (PBS) has utilized the Special Reserve Fund (SRF) for nearly a 

decade to ensure the Nation is better prepared with new medical countermeasures (MCM) to 

address the dire medical consequences of catastrophic chemical, biological, radiological, and 

nuclear events in the civilian population, PBS has afforded eleven (11) new medical 

countermeasures for treatment or post-exposure prophylaxis against anthrax, smallpox, botulism, 

illnesses associated with radiological and nuclear events, and chemical agent intoxication (Table 

1); recently two of these MCMs were the first products approved by the FDA under the Animal 

Efficacy Rule authorized under PBS. Additionally the SRF has supported the Biomedical 

Advance Research and Development Authority's (BARDA) establishment ofa robust and 

diverse medical countermeasure development pipeline of 80+ product candidates for these 

threats. The future for PBS is even brighter, as this MCM development pipeline is expected to 

render at least twelve more new MCMs under PBS over the next five years to address anthrax, 

other biothreats including glanders and melioidosis, other illnesses associated with Acute 

Radiation Syndrome, thermal burns and blood replacement, and volatile chemical agents. 

15. We are losing the fight against drug resistant pathogens. Our current autibiotic 

armamentarium is low and not regenerating fast enough. In the President's budget 

proposal, BARDA acknowledged this and is interested in helping advance new 

products. But manufacturers are fleeing the business, and only a few major companies 

are working in the field-it just doesn't make fiscal sense: the drugs are used 

infrequently-a good thing to keep resistance in check-and are meant to eradicate a 

pathogen in only a few doses. The FDA is putting in tremendous work to speed up 

product development, but what else can we be doing to further this critical therapeutic 

arena? 

Answer: HHS agrees with your assessment of the emergence of drug resistant organisms and 

lack of new antibiotics. As the emergence of drug resistant organisms continues to increase, 

financial incentives for pharmaceutical companies to venture into this arena become scarcer. 

BARDA adopted in 2010 a strategic approach to incentivize companies developing novel 

antimicrobials for biothreats while having secondary public health benefits especially in the fight 

against antimicrobial drug resistance. Today BARDA supports the advanced development of 

seven (7) antimicrobial drug candidates for biothreats by partnering with five (5) companies and 

some clinical studies to evaluate these candidates for public health indications (e.g., MRSA). 

One obvious benefit to this strategy is the eventual availability of these new antibiotics in the 

commercial market will reduce the need to stockpile as much of these or similar antibiotics in the 

event ofa biological attack. BARDA formed public-private partnerships with industry to share in 

the investments necessary to bring new drugs to market. Figure 1 highlights BARDA's 

investment strategy in products that have the potential to impact both biothreats as well as 

emerging drug- resistant public health pathogens. 

BARONs investment strategy has received accolades from the Infectious Disease Society of 

America (lDSA) stating in public meetings "BARDA is keeping the antibiotic industry on life 

support". In addition, the PEW Charitable Trust sent a letter to Chairman Upton and Ranking 

Member Waxman stating "[BARDA' s 1 program has become an important source of funding at a 

time when there are few promising new antibiotics in late stage development". ..... the broad 

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spectrum antimicrobial program at BARDA is supported by industry and is a promising pathway 

for incentivizing new antibiotic development." BARDA is currently supporting multiple 

manufacturers developing products for both biothreat pathogens and public health concerns: 

• Achaogen - completed Phase II preparing for a large Phase III for CRE 

• Tetraphase/CUBRC - in Phase II for MRSA, Gram(-) acinetobacter 

• GlaxoSmithKline - a portfolio of three candidates at various stages Gram (+) and 

atypical Gram (-) bacteria 

• Cempra - Phase I CRE and MDR Gram( -) Pseudomonas, acinetobacter 

• Baselia - Phase I CRE, MDR Gram(-), Pseudomonas, acinetobacter 

The partnership with GlaxoSmithKline (GSK) utilizes Other Transactional Agreement, an 

authority provided to HHS under the Pandemic All-Hazards Preparedness Act (2006). This is 

BARDNs first use of this authority for product development and allows BARDA to invest in a 

portfolio of products instead of awarding a FAR-based contract for each candidate product. The 

agreement allows BARDA to participate on a GSK advisory board. Additionally, BARDA will 

have a say in how GSK invests their own capital in this portfolio of products. 

The FDA has been proactively working with sponsors to explore innovative approaches to 

developing antibacterial drugs, particularly those intended to treat infections caused by 

antibiotic-resistant organisms and that otherwise address unmet medical needs. For example, 

FDA is currently drafting guidance to industry to assist sponsors in the development of 

antibacterial drugs for patients with unmet medical need for the treatment of serious bacterial 

diseases. FDA is also actively implementing the Generating Antibiotic Incentives Now (GAIN) 

Act, which, among other incentives, provides for an additional five years of market exclusivity 

for certain drugs that treat serious or life-threatening bacterial and fungal infections, including 

those caused by resistant organisms. These efforts represent BARDA, the FDA and Congress 

working in concert to incentivize manufactures to develop products to address the emergence of 

antibiotic resistance. 
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Table 1. Medical countermeasures acquired under Project B' loSbield in FY2004-FY2 03 1 , 

MCM Start SNS Industrial Funds 

Date Delivery Partner Obligated 

.'. .' " ANTHRAX 

Anthrax Antitoxin 9/2005 Completed GlaxoSmithKline $174M 

Monoclonal 7/2009 Completed (formerly Human $160M 

Antibody Genome Sciences) 

(Raxibacumab®) 

FDA approved 

(2012) 

Anthrax Antitoxin 9/2005 Completed Cangene $160M 

Anthrax Immune 

Globulin (AIG®) 

Anthrax Antitoxin FY2013 Active Solicitation - Procurement Sensitive 

Anthrax Vaccine 5/2006 Completed Emergent $243M 

(BioThrax®) 9/2007 Completed Emergent $465M 

.......... . .. : SMALLPOX :, .... ' ... SmallpoxMVA 6/2007 Ongoing Bavarian Nordic $541M 

vaccine 4/2013 2014 $110M 

(IMV AMUNE®) 

Smallpox antiviral 5/2011 Ongoing SIGA Tech, Inc. $433M 

drug (Arestvyr®) 

':, .... '.': .. , BOTULISM .' ... Botulinum antitoxin 9/2006 Completed Cangene $476M 

(HBAT®) 

FDA approved 

(2013) 

i·· •. ·:.; RADINUC TImEATS ." 

Potassium Iodide 3/2005 Complete Fleming $18M 

(ThyroShield®) 

FDA approved 

DTPA-Ca 12/2005 Completed Akorn 

FDA approved 

DTPA-Zn 12/2005 Completed Akorn $22M 

FDA approved 

Anti-neutropenia FY2013 Active Solicitation - Procurement Sensitive 

cytokines 

.' ,. CHEMICAL TImEAT 

Anti-convulsive FY2013 Active Solicitation - Procurement Sensitive 

drugs 

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Figure 1. BARDA strategic approach to antibiotic drug development for biothreats with 

secondary benefits towards antimicrobial drug resistance in the public health sector . 

• Investment Strategy: 

Alignment to pathogens that have a chance to significantly impact public health 

(relevance to both biothreat and public health) 

Focus on novel targets/chemistry (higher risk) 

Balance portfolio w"ith established classes in advanced stages of development 

(lower risk) 

Cost share in Phase III to reduce risk (mitigation) 

Diversify investment around disease indications (reduces regulatory risk) 

16. In August 2012, CDC found that three-fourths of all persons infected with Hepatitis-C 

are among the baby boom birth cohorts, with the vast majority unaware of their 

infection, and recommended that every boomer get screened once in their life 

regardless of risk factors (risk based screening was deemed of "limited success.") 

Meanwhile a sister agency, USPSTF, issued its draft guidelines for HCV screening that 

wants to continue on using risk-based screening and ignores the high density of HCV 

positive people in the baby boom generation. HCV costs are about to explode on 

Medicare--even though it's easy to test and then treat these populations, with new 

treatments literally curing people ofthe disease--and the ACA requires health plans to 

follow the USPSTF guidelines, and HHS does not seem ready. What is the Department 

doing to navigate and head offthis looming medical and fiscal crisis? 

Answer: In regard to Medicare coverage of screening for Hepatitis C Virus amongst the baby 

boom birth cohort, CMS has limited authority to consider coverage of new preventive and 

screening services. Specifically, the Medicare statute authorizes the Secretary to add coverage of 

"additional preventive services" - that is, preventive services not already covered under specific 

statutory provisions if the service is recommended at the "A" or "B" level by the U.S. 

Preventive Services Task Force (USPSTF), and the service is determined through the Medicare 

national coverage determination (NCO) process to be appropriate for Medicare beneficiaries. 

As you noted, the USPSTF recently initiated a reconsideration of their 2004 recommendation on 

routine screening for Hepatitis C Virus and issued a draft updated recommendation for public 

comment in November 2012. Until the USPSTF issues a final recommendation, Medicare lacks 

authority to consider coverage of this service. When a final recommendation is available, we will 

consider whether it warrants the opening of a national coverage analysis (the first step in the 

NCD process). The status of the Task Force's work on this subject can be monitored at 

http://www.uspreventiveservicestaskforce.org/uspstf/uspshepc.htm. 

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In regard to the Affordable Care Act provision for private insurance coverage of preventive 

services recommended by the USPSTF. the law requires that non-grand fathered plans cover 

services with an A or B recommendation without cost-sharing. Screening for Hepatitis C does 

not currently have an A or B Recommendation from USPSTF. and it is therefore not required to 

be covered. 

17. The President's Budget proposal uses language suggesting ACA expansion efforts will 

take over much of the medical services of HI V patients, currently provided under Ryan 

White programs, ostensibly freeing up federal support for ancillary services for HIV 

patients-but what are the actual funding needs of this population, how should funds 

be used appropriately? What is HHS doing to help Ryan White grantees become 

fedcrally qualified health centers to help beneficiaries in providing health services after 

ACA implementation? 

Answer: The Affordahle Care Act will provide coverage for primary medical care through 

Medicaid expansion and access to private insurance for many PL WHo As the Affordable Care 

Act is implemented, HHS anticipates changes in how Ryan White Program funds are utilized. 

The RWHAP will continue to provide core medical and "continuum of care" services to clients 

as needed. Core medical services not covered by insurance. include comprehensive substance use 

treatment. mental health services, and care coordination services. The details of this will vary 

from state to state depending on coverage decisions in Marketplaces and Medicaid. The RHW AP 

will also continue to have an important role in supporting community-based systems of care 

responsive to local needs and will support "continuum of care" needs of PL WHo Examples of 

services include case management, transportation assistance, and treatment adherence. which are 

critical to keeping people in care and on drug regimens that decrease viral load. Providing such 

services leads to improved clinical outcomes and prevents the spread of the domestic HIV 

epidemic. as recent studies have found that anti-retroviral treatment reduces IIIV transmission by 

96 percent. 

By statute, the RWHAP is the payer oflast resort. The program will only pay for eligible 

services that are not covered or minimally covered by other private or public insurance. The 

program currently provides, and will continue to provide, medical coverage completion and 

continuum of care services for those patients with or without insurance to ensure that vulnerable 

populations receive the full range of services necessary to remain in care and improve health 

outcomes. 

HRSA's Bureau of Primary Health Care (BPHC) received increased funding for the Health 

Center Programs. In FY 2013, an estimated $19 million will be awarded to establish 

approximately 25 new health center access points. The Health Center Program New Access 

Points is a competitive Health Center Program funding opportunity to support new service 

delivery sites for the provision of comprehensive primary and preventive health care services. 

All applicants must demonstrate a high level of need in their community/population, a sound 

proposal to meet this need by ensuring the availability and accessibility of essential primary and 

preventive health services, including oral health, mental health and substance abuse services, 

responsiveness to the health care environment, col!aboration and coordination with other area 

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health care providers, and readiness to rapidly implement the proposal. HRSA Ryan White 

grantees interested in becoming a health center were eligible to apply. To support this effort 

HRSA conducted a training session for Ryan White grantees interested in applying for Health 

Center Program funding in November 2012. The President's budget for FY 2014 includes 

funding for New Access Points. New funding opportunities are posted on the HRSA Grants 

Web site at http://www.hrsa.gov/grants and www.Grants.gov. Additionally, organizations may 

apply at any time to receive designation as a Federally Qualified Health Center (FQHC) LookAlike. FQHC Look-Alikes must meet the same requirements as section 330 grantees. but do not 

receive Health Center Program funds. FQHC Look-Alikes are eligible to receive cost-based 

reimbursement for services provided under Medicare. be reimbursed under their State Medicaid 

Prospective Payment System (PPS), and participate in HRSA's 340B Drug Discount Program, 

among other benefits. Other webinars that have been hosted by HRSA include: Protecting the 

Health Safety Net: Models to Help Non-FQHCs Prepare for I lealth Care Reform 

Implementation. This wcbinar focused on models for safety net providers in adapting to the new 

payer and provider environment under the Affordable Care Act. 

HRSA's RWHAP National Technical Assistance Cooperative Agreement funded the HIV 

Medical Homes Resource Center (HIV-MHRC) whose overarching goal is to provide training 

and technical assistance to assist Ryan White HIV / AIDS Program grantees to understand, 

develop and successfully apply to become recognized Patient-Centered Medical Homes 

(PCMH). HRSA and CMS have co-sponsored webinars designed to orient Ryan White 

HIV/AIDS Program grantees and providers to the changing healthcare landscape of2014. The 

webinars have focused on coordination across Medicaid and the Ryan White IIIV/AIDS Program 

and highlight the differences between the current and future health care system for Ryan White 

providers. 

HRSA also funded the AIDS Education and Training Center National Center for HIV Care in 

Minority Communities to provide intensive technical assistance to community health centers to 

increase the capacity of selected health centers to provide services or increase their level of 

services to PLWH. HRSA has also launched new Affordable Care Act website sections to house 

many resources and tools useful to Ryan White grantees to learn about, help enroll their patients 

in new coverage options. and get prepared as providers under the Affordable Care Act. 

The Honorable Joe Barton 

I. Given recent reports from China abont what could be a very serious emerging threat 

from a new flu virns, how will the Departmeut of Health and Human Services (HHS) 

make sure its recently awarded Centers for Innovation and Advanced Manufacturing 

are fully utilized, including removing any unnecessary burdens from bureaucratic 

processes within the Assistant Secretary for Preparedness and Response (ASJ>R) office 

that seem to plague other similar contracts? 

Answer: The outbreak of novel H7N9 influenza virus in China is being closely monitored by 

HHS. Since February 2013. over 130 cases of infection caused by the H7N9 influenza virus have 

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been reported in China with an estimated 30% fatality rate. However, with the closure of the live 

animal markets in China, and the onset of summer. there has been a dramatic drop in the number 

of cases. The last reported case was in mid-May. 

The Department has taken several steps to respond to the H7N9 outbreak. as BARDA has 

engaged nine influenza vaccine manufacturers to develop H7N9 vaccines and possibly establish 

a small pre-pandemic H7N9 vaccine stockpile. New vaccine technologies - cell- and 

recombinant-based vaccine technologies - supported by HHS over the past decade and resulting 

in FDA-licensure over the past six months are available now to make more and better vaccine 

sooner in the U. S. 

Manufacturers. CDC. and others developed vaccine seed candidates for vaccine production and 

distributed to all FDA-approved influenza vaccine manufacturers. BARDA supported 

development of several vaccine seeds using a state-of-the-art biosynthetic technology affording 

rapid one-week turnaround and without the actual H7N9 virus. Clinical investigational lots of 

H7N9 influenza vaccine are under production presently for clinical evaluation with adjuvants 

later this summer by the NIH and vaccine manufacturers to determine safety and 

immunogenicity. and dosage 

If the H7N9 influenza virus were to emerge into pandemic, then HHS would direct these vaccine 

manufacturers to produce vaccine (and the delivery of supplies) needed to protect the public. 

During a pandemic situation. HHS contracting and technical personnel work closely to ensure 

timelines are compressed so that HHS can rapidly respond to the public health emergency. 

The three Centers for Innovation in Advanced Development and Manufacturing (CIADM) 

established by HHS under BARDA leadership (2012) are an important component of the HHS 

response to infectious disease outbreaks. such as pandemic influenza. The three Centers will 

support on a daily routine basis the advanced development and manufacturing ofCBRN medical 

countermeasures and will produce in an emergency at least 50 million doses of pandemic 

influenza vaccine within four months of the declaration ora public health emergency using novel 

and flexible modern manufacturing technologies. This pandemic vaccine production capability is 

completed already at the Novartis-based Center located in North Carolina. The other two Centers 

in Texas and Maryland will utilize the expertise ofGlaxoSmithKline and Vaxlnnate. 

respectively. to produce pandemic influenza vaccines later this decade. 

2. I am routiuely iuformed that the coutractiug fuuction handled by the office ofthe 

Assistant Secretary for Prepareduess and Response is inefficient and lacks 

transparency. This has not only delayed procurement of needed medical 

countermeasures but also results in wasted effort, increased expense and deterred 

participation. What can HHS do to improve the performance by the contracting office 

within ASPR? 

Answer: HHS/ASPR has instituted numerous business practices since the MCM Review (2010) 

to make the contracting activities for medical countermeasures more efficient and accountable. 

The usage of Broad Agency Announcements to solicit proposals from potential offerors at any 

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time of the year has greatly cncouraged new and better proposals and reduced the cycle time 

from proposal submission to contract award by more than 25%. In-Process Reviews with 

PHEMCE interagency panels that started in 2011 have held BARDA programs and industrial 

partners more accountable to timelines and milestones. The usage of Other Transaction 

Authority in 2013 for public-private partnership agreements for MCM development may provide 

another avenue to streamline the contracting process. Lastly ASPR regularly monitors and 

adjusts many other business practices affecting program and contracting activities. 

3. HHS has the authority under the recently reauthorized Pandemic and All Hazards 

Preparedness Act to use "other transaction authority" to allow contracts to run more 

efficicntly. It has had this authority since 2006, yet has never used it. The Department 

of Defense (DOD) has similar authority and has used it to great effect. Why has HHS 

not used this authority? Aren't the new Centers for Innovation and Advaueed 

Manufacturing precisely the type of effort that should be conducted under Other 

Trausaction Authority'! Has this been considered? 

Answer: BARDA utilized OTA in May 2013 to reach an agreement with GlaxoSmithKline 

(GSK) to develop antimicrobial drugs against biothreats using a portfolio approach. This was the 

first use of OT A by BARDA in product development since the authority was provided in 2006. 

The use of OT A with GSK allows BARDA to develop mUltiple drug candidates in parallel with 

this industrial partner and have input on the usage of resources by GSK towards development of 

these and other antibiotic drug candidates in the pipeline. Previously. BARDA awarded 

traditional FAR based contracts for each product candidate and terminated contracts if the 

product failed an unfortunate but common occurrence in drug development. Under the OT A. 

BARDA and GSK share development costs over a portfolio of product candidates. If one fails. 

then GSK and BARDA decide its discontinuation and addition of other candidates in the GSK 

pipeline. Under this agreement BARDA will also participate on an Advisory board with a voice 

on how GSK will invest their own capital to support the products. Supporting a portfolio of 

candidate products is an excellent use of OT As. 

In many other instances such as manufacturing facility retrofitting with sanofi Pasteur and 

Medlmmune. new manufacturing building with Novartis. and the CIADMs, BARDA was able to 

utilize the FAR to reach long-term and successful agreements by conventional FAR-directed 

contracts. Agreements using the OT A were considered in each of these instances. but a better 

solution was achieved using FAR-based contracts. 

The Honorable Ed Whitfield 

1. For the past two years, about 100 bipartisan Members of Congress have signed a letter 

in support of the NDPP because it is one of the most innovative, evidence-based models 

we have to prevent a disease that is expected to impact one in two adults by the end of 

this decade. It has been estimated that this program could save the nation between 

$100-$191 billion over the next decade. That said, it is not mentioned ill your FY 2014 

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budget. Cau you please explaiu the decisiou to uot fuud this importaut public-private 

partuership that will teach people persoual respousibility while beudiug the cost curve? 

Auswer: CDC's National Diabetes Prevention Program (National DPP) was authorized in 20 10 

by the Affordable Care Act. In fiscal year (FY) 2012. CDC was awarded $10 million through the 

PPHF to implement the National DPP. evidence based program. which has been proven to 

prevent the onset of type 2 diabetes for individuals with pre-diabetes. 

With the PPHF allocation, six awardees were funded to establish a network of structured, 

evidence-bascd lifestyle change programs. As part of this expansion, organizations are meeting 

with employers to discuss offering the lifestyle change program as a covered health benefit for 

employees and will work with third-party payers, including public and private health insurance 

companies. to facilitate reimbursement directly to organizations delivering the lifestyle change 

program. Over the life of the award. grantees are expected to achieve the lifestyle change 

program as a covered benetlt for a minimum of 500.000 employees. CDC's initial efforts have 

resulted in five insurers and over 280 self-funded employers who provide coverage and access 

for the lifestyle change program. 

A key component of the National DPP, CDC's Diabetes Prevention Recognition Program 

(DPRP), which sustains data analysis, provides technical assistance to organizations. and assures 

quality, consistency, and broad dissemination of the lifestyle intervention. The DPRP assures 

quality and fidelity of the intervention by recognizing programs that have shown they can 

effectively deliver a lifestyle change program to prevent type 2 diabetes. 

No PPHF funding was committed to this program in FY 2013. CDC will partially sustain these 

activities with limited use ofFY13 budget authority to maintain the essence of the program. In 

FY 2014, the President's Budget proposes $10 million in budget authority to the Diabetes line to 

support the National DPP activities. Additionally, through a Center for Medicare and Medicaid 

Innovation (CMMl) grant awarded in2013, the National YMCA (Y-USA) was awarded $12 

million over three years, to work with their local Y affiliates to conduct a demonstration project 

in 17 communities in 8 states (MN. NY, AZ, OH, lX FL, IN, DE) to deliver the National DPP 

to 10.000 Medicare FFS enrollees and assess cost savings. 

2. The Ceuters for Medicare aud Medicaid Services (CMS) cnrrently covers the fastiug 

blood glucose test aud oral glucose tolerance test to screen for diabetes iu Medicare 

enrollees at risk for diabetes or those already diaguosed with prediabetes. However, 

physicians and other primary care providers are findiug that the Al C test is actually 

the most convenieut way to screen patieuts for diabetes. In a letter to Senator Hagau iu 

December 2011, you said "this test has beeu recommended by the ADA for diagnosis 

and is under consideration by CMS for coverage by Medicare." Yet, iu 2013, CMS docs 

uot cover the cost of au Al C test for purposes of screeuiug. What cau be doue to 

eucourage use ofthe Al C test for screeuiug? 

Answer: CMS has had several contacts with the American Diabetes Association (ADA) in 

regard to the ADA's recommendation that the A I C test be added to the options covered by 

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Medicare for diabetes screening purposes. including a meeting with CMS' Chief Medical Officer 

in August 2012. CMS concluded that Medicare's transparent. evidence-based National Coverage 

Determination (NCD) process would be the best avenue tor CMS' consideration of this 

issue. However, we have not, to date, received a complete formal coverage request for coverage 

of the A IC test as a diabetes screening test from the ADA or any outside paIty.lfthe any 

stakeholder decides to pursue such a request, including the submission of relevant evidence. we 

will consider it. 

3. I thank the CDC's Division of Diabetcs Translation for relcasing thc first-ever Diabetes 

Report Card in 2012. This initial Diabetes Report Card is a baseline, and law requires 

it to be updated every two years aud to include national and state trend data. In light of 

coutinual improvement, areas that could be expanded include additional data on 

gestational and undiagnosed diabetes (including state data), inclusion of average Alc 

level data trends amoug individuals with diaguosed diabetes, and the mention of 

Medical Nutritiou Therapy counseling as a Medicare benefit proven to positively 

impact diabetes outcomes. How can we work with you to continue to improve the 

Report Card before it is next issued in 2014? 

Answer: CDC is preparing for the 2014 Diabetes Report Card. The Report Card will be 

responsive to the requirements of Section 10407 of the Affordable Care Act. This section directs 

the Secretary, in collaboration with the Director of CDC. to biennially prepare a national diabetes 

report card that aggregates data about health outcomes related to individuals diagnosed with 

diabetes and prediabetes. 

CDC continues to look for ways to improve future Report Cards. Currently, CDC is reviewing 

our established data sources to prioritize and select information that best represents national and 

state diabetes data about prevalence. preventive care practices and the quality of care. risk 

factors, health outcomes and national progress in meeting Healthy People goals. CDC will 

consider including national estimates for Ale. gestational diabetes and undiagnosed diabetes. 

CMS receives claims data related to Medical Nutrition Therapy counseling, which is covered for 

Medicare beneficiaries with diabetes or renal disease. CDC will explore opportunities to 

incorporate relevant information on this benetit in future Report Cards. 

4. As you know, this Committee has been very concerned about CDC grantees nsing 

CPPW funds to engage in activity to change laws and regulations at the state and local 

level. Unfortunately, CDC grantees across the country appear to be continuing to 

engage in similar activity with PPHF fuuds. 

For example, the State of Miunesota advised its CTG grantees that their Community 

Transformation Grant (CTG) funds could be used to make changes to state ordinances. 

A Q & A document ayailablc on the State's website reads " ... a erG strategy could 

include updating tile ordinance to increase tile price of tobacco retail licenses to pay for 

tile program ... " Similarly, the County of Fairfax, Virginia includes the following CTG 

strategy on its website, "increase tile tax: 0/1 packs of cigarettes purchased ill Faiifax 

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COUI/(V". Houston/Harris County, Texas encouraged their CTG sub-grantees to "limit 

densiry oj/ast food outlets and other outlets featuring high calorie, high sodium, and low 

I/utrition foods" through "zoning: regulate the number of fast food restaurants in a given 

area." 

In order to fulfill our Congressional oversight responsibilities, I would like to 

respectfully request the following documents in relation to the CDC grants identified in 

Appendix A in the documcnt attached to this letter: 

• copies of all documents associated with the grants, whether competed or not, 

solicited or unsolicited, including your proposals and award documents. 

• copies of the grant program tiles pertaining to the funded activities, including but 

not limited to budget detail and worksheets and regular progress reports including 

narratives, budget information and all correspondence with CDC grantees and 

subgrantees regarding the intent, purpose and use of the grant dollars. 

• copies of all communications involving or by grantees or subgrantees, describing 

meetings or correspondence with public officials at the state and local level. 

• copies of all materials received re training, educating and monitoring grantees' use 

of the grant, including Powerpoint presentations, background preparatory 

materials and memoranda describing the programmatic goals and success of 

changing laws and policies at the state and local level. 

• copies of all materials addressing or analyzing whether grantees or subgrantees 

have violated any anti-lobbying statutes (e.g., 18 USC §1913; 31 USC §13S2(a), 

appropriations bills (www.gpo.gov/fdsys/pkg/BILLS-lllhr3288enr/pdf/BILLS11 1 hr3288enr.pdf) or administrative regulations (e.g., AR-12). 

• eopies of all materials addressing proposed or actual remedies for violating antilobbying statutes or regulations, including all materials describing or listing 

grantees or subgrantees that have violated anti-lobbying statutes or regulations. 

• Copies of any correspondence or notes regarding minutes of meetings or public or 

private reports describing the intent, pu rpose and use of the grant dollars, including 

any reference to dcscriptions of activity involving efforts to cbange policy, laws, 

regulations at the state and local government level. 

Answer: The Communities Putting Prevention to Work (CPPW) program. primarily funded in 

FY 20 I 0 through American Recovery and Reinvestment Act (ARRA), is essentially completed. 

Through the program, the CDC has worked with award recipients in all 50 states, the District of 

Columbia, Puerto Rico, and six Pacific Island territories to address chronic disease risk factors, 

including obesity and tobacco use, These grantees made substantial progress on priorities 

identified by communities across the United States, tackling significant public health problems 

and achieving real results to improve the health of communities, 

In 2010. Congress established the PPHF as part of the ACA, The PPHF has been used to fund 

important investments in our nation's health, including improvements in our ability to immunize 

children, reduce health-care acquired infections, improve laboratory systems at the state level, 

and detect and respond to disease outbreaks. This Act also established the Community 

Transformation Grant (CTG) program, which supports evidence and practice-based efforts in 

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states and communities to reduce chronic diseases. Awardees are addressing the priority areas of 

I) tobacco-free living; 2) active living and healthy eating; and 3) high quality clinical and other 

preventive services. including prevention and control ofhigh blood pressure and high 

cholesterol. 

We will work with the Committee to respond to your requests, but it is important to note that not 

all activities proposed in an application were ultimately funded by CDC. Following the initial 

application (proposal). CDC worked with the applicant to review and identifY funded activities. 

We can assure you that I-IHS remains committed to proper oversight and monitoring of 

appropriated funds. and to awardees' compliance with all applicable regulations and statutes. 

HHS awardees, including those in the CPPW and the CTG programs, are infon11ed about the 

applicable federal laws. regulations, and policies relating to the use offederal funds. including 

applicable anti-lobbying provisions. 

HHS and CDC staff continue to follow rigorous procedures for monitoring all grant awards. 

including those funded from the ARRA and PPHF. As a result of CDC's oversight of awards, 

CDC has identified a total of three grantees that engaged in impermissible lobbying activities 

with CDC funds through the CPPW program. and enforcement actions have been taken. CDC 

followed its risk mitigation procedures, conducted calls with the grantees, and elevated the issue 

within CDC to determine whether the activities were conducted with CDC funds, and whether 

the activities were impermissible. After a thorough review, CDC determined that these three 

grantees conducted impermissible lobbying. In accordance with applicable grant regulations. 

CDC has taken enforcement actions against the grantees and disallowed these costs. 

We have provided a substantial amount of additional education and guidance in the past several 

years to both grantees and staff on the appropriate use of federal funding, particularly related to 

anti lobbying restrictions. In July 2012, the HHS Office of Inspector General (OIG) 

recommended that we reinforce our efforts in the CPPW program to inform grantees of 

applicable restrictions through multiple avenues. CDC has embraced and implemented OIG's 

recommendations and has applied them to all agency grants. CDC's response to the Inspector 

General is attached. More recently. over the past year the Government Accountability Office 

(GAO) conducted a performance audit on CDC's policies on lobbying and CPPW award 

recipients' activities. The final report was released on May 31. and documented the robust 

procedures CDC has in place to ensure appropriate use of CDC funds by grantees. GAO's report 

is available at h.!tp:iiw"" .gao.gov/assets/660/654272.pdC 

Congress added language to section 503 of the Labor. HI-IS, and Education Appropriations Act 

for FY 2012. In June 2012. CDC distributed written guidance reflecting the changes in the 

Appropriations Act to its staff and to CDC grantees. This more detailed CDC guidance document 

includes the revised CDC anti-lobbying policy (AR-12). which is consistent with the provisions 

in the I-/!-IS Appropriations Act. This new guidance, a copy of which is attached, also provides 

specific examples of restricted and allowable activities. CDC undertook an intensive effort to 

communicate the new guidance to all of its grantees, and has incorporated the revised AR-12 into 

all new grants. 

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At HHS. we are committed to fulfilling the mandate from Congress to empower communities to 

pursue high-quality programs that make a real difference in the health of Americans. Awardees 

are working to reduce the impact of chronic diseases on our population and health system. The 

Department will continue to enable their success and to ensure that federal funds are used 

efliciently and appropriately. 

The Honorable Mike Rogers 

I. Recently, we have had some frightening reminders of the threats we continue to face in 

this country. The bombs in Boston and the ricin laced letter addressed to our Senate 

colleague and President Obama demonstrate that we mnst remain committed to 

preparing for the threats we know about, as well as build capacity to respond to those 

we cannot anticipate. 

In that vein, reauthorizing the Pandemic and All-Hazards Preparedness Act (P AHP A) 

was a top priority for the Committee over the last two years. One of the key 

components of the receutly enacted legislation is a provision to reauthorize the Project 

BioShield Special Resene Fund (SRF) at $2.8 billion to be available for the next 5 

years. The SRF was originally created as a guaranteed market incentive to encourage 

companies to develop and produce medicines and vaccines to protect Americans from 

identified threats, since there is no commercial demand for these products. 

I am very concerned by the level of fundiug provided to the SRF in the President's 

Budget. Shifting to an annual appropriation, aud at ouly $250 million, would create 

extreme uncertainty in the medical countermeasures market. The funding provided is 

not even one fifth of the five year authorized level of $2.8 billion and is less than many 

individnal BioShield procurement contracts. In addition, the new multi-year 

contracting language is NOT sufficient to make up for the lack of funds. 

In your professional opinion, what has been the impact of the Project BioShield Special 

Reserve Fnnd over the last 10 years? How will you ensure that the Project BioShield 

Special Reserve Fund is available for the next 5 years to give confidence to the 

pharmaceutical and biotechnology companies that arc developing and delivering 

essential medicines to our national stockpile? 

Answer: The Special Reserve Fund has resulted in HHS's creation ofa robust development 

pipeline containing more than 80 medical countermeasure candidates for chemical, biological. 

radiological, and nuclear threats. This development has resulted in the delivery of 11 new 

medical countermeasures (MCMs) to the Strategic National Stockpile (accessible by Emergency 

Usage Authorization) and the FDA licensure of two of these MCMs. 

Over the past nine years, HHS has developed additional tools to foster its relationship with the 

provision of ARD funding, and the expansion of authorities under Project BioShield most 

notably the introduction of milestone payments in contracts. More recently. per 

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recommendations from the Secretary's Review of the Public Health Emergency Medical Counter 

Measure Enterprise (PHEMCE) following the 2009 HI N I pandemic. came the establishment of 

Centers of Innovation for the Advanced Development and Manufacturing (CIADM). These 

public-private partnerships allow BARDA to pair large established pharmaceutical companies 

with smaller finns. These pairings mitigate the scientific and manufacturing risks associated with 

MCM development by providing the necessary expertise to bring promising technologies to the 

marketplace. Additionally. the PHEMCE Review recommended the establishment ofa MCM 

Strategic Investor, an independent non-profit entity. which would use HHS funding to support 

capital investments in private companies with promising technologies. By providing critical 

capital in exchange for a strategic role in the management of these small firms. HHS would be 

able to mitigate the financial and management risk that some small firms tace. thereby increasing 

the probability of successful techno logics and products. 

Since the development and procurement ofMCMs is an inherently risky endeavor. BARDA 

remains focused on keeping suflicient incentives in place for its industry partners. This effort 

includes an HIlS intra-agency multi-year budgeting practice driven by the long-lead time 

necessary for MCM development and acquisition. Large pharmaceutical companies (e.g .. 

Amgen. GlaxoSmithKline. etc.) are now joining the biodefense MCM sector, using long-range 

budget planning routinely as a good business management practice. Venture capital investors. 

which fund many small biotech companies in the biodefense sector, may choose to support 

biotech companies in a different sector that has a better benefit-to-risk profile than biodefense. 

These circumstances support the critical need to ensure a long-term funding commitment is 

maintained with annual appropriations in the future. Maintaining the progress that has been 

achieved in the recent years rcquires Congress' continued support for these future activities. 

The Department agrees that providing industry with a clear indication of long-term support of 

medical countermeasure development is important to the success of Project BioShield. The 

Budget explicitly states the FY 2014 request represcnts a multi-year renewed commitment to 

Project BioShield. Additionally. as an added incentive, the FY 2014 President's Budget proposes 

language to provide BARDA with the authority to modify the standard government-wide 

authority for multi-year contracting (41 USC 3903). This sends a clear message of commitment 

because the modified language included in the FY 2014 President's Budget authorizes BARDA 

to enter into an "incrementally-funded". multi-year contract for up to ten years. Additionally, the 

language modifies the existing authority'S requirement of set-aside contract termination costs by 

allowing BARDA to repurpose any un-used termination costs to pay contract invoices in 

subsequent years. This differs from traditional multi-year contracting authority, which specifics 

termination costs can be used for that purpose alone. These modifications allow BARDA to 

effectively utilize the valuable tool of multi-year contracting authority to engage in long-term 

contracts with companies that develop medical countermeasures. 

The Honorable Michael C. Bnrgess 

1. The Administration's proposed budget includes legislative proposals pertaining to 

rehabilitation hospitals, one ofwhieh seeks to pay rehabilitation hospitals nursing 

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home-based rates for certain conditions because, according to the President's budget, 

IRFs are services that "may not be appropriate" for certain conditions. A second 

proposal would elevate the IRF "60% Rulc" to a "75% Rule" to "ensure that IIRFsJ 

are classified appropriately." 

As you know, Medicare expcnditures for IRF services have remaiued relatively flat for 

the past 6 years, the number of IRFs is not increasing, and the number of beneficiaries 

treated iu IRFs is not growing faster than the overall growth in Medicare beneficiaries. 

What specific data or evidence docs HHS have to justify support for these proposals? 

Answer: Studies by MedPAC and the Institute of Medicine indicate that there is wide variation 

in the utilization of post-acute care services.le This overutilization is driven. in part. by Medicare 

payments that significantly exceed costs in certain post-acute care settings, and by higher 

payments for care provided in more intensive care settings (for example, IRFs), even though the 

care provided is similar to that provided in other types of post-acute care facilities (for example, 

SNFs). 

One of the goals of the post-acute care proposals in the President's FY 2014 Budget is to 

encourage care delivery in the most appropriate care setting. Under current law. IRFs receive 

higher payment rates than other medical facilities. including SNFs. which often provide care 

similar to that provided by IRFs for those IRF patients that are not part of the "60 percent rule." 

We believe that tacilities that are paid as IRFs should predominantly provide services to patients 

requiring more intensive care than can be provided at other medical facilities. As you know, the 

classification criteria for IRFs require that at least 60 percent of an IRF's patients need intensive 

rehabilitation services for treatment of one or more of 13 specified conditions. After an initial 

phase in period. this classification requirement was originally set to peak at 75 percent. but was 

later reduced to no more than 60 percent by the Medicare. Medicaid. and SCHIP 

Extension Act 01'2007. If adopted, the proposal would return the classification standard 

maximum to 75 percent to ensure that Medicare-paid IRFs are even more focused on treating 

patients who require specialized. intensive care that would justify the higher payments to IRFs. 

The proposal to equalize payments for certain conditions treated in IRFs and SNFs also seeks to 

distinguish between different post-acute care settings by defining which conditions arc best 

treated at IFRs-and which are not. Currently. treatment of certain knee. hip and pulmonary 

conditions that do not require intensive therapeutic post-acute care can be performed in either an 

IRF or an SNF, but Medicare payments arc much higher if the treatment occurs in an IRF. This 

proposal would. beginning in 2014. make Medicare payments more equal for certain knee. hip. 

and pulmonary conditions. as well as other conditions selected by the Secretary. These 

conditions are commonly treated at both IRFs and SNFs. 

I MedPAC (Januaty 2011). Regional Variation in Medicare Service Use. pp 6-7. Retrieved (May 24. 2013) at 

lrrtp:'/www.mcdQ3c.gov idocumentsiJanl! RegionalVariatj_on report.PQJ 

, Institute of Medicine (2013) Interim Report of the Committee on Geographic Variation in Health Care Spending 

and Promotion of High-Value Health Care: Preliminary Committee Observations. Retrieved (June 3, 2013) at 

http://www . iom.eduiReportsi20 J3!Geograph i e-V ariation-in-ll ealth-Care· Spend ing-and-Promotion-of-H i gh-CareVaJue-Interim-Report,asjJX 

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2. If either or both of these proposals were adopted by Congress, more Medicare 

beneficiaries would be shifted into nursiug homes. In light of repeated concerns 

expressed by the HHS-OIG, MedPAC, and CMS that Medicare may be overpaying 

nursing homes for rehabilitation and therapy services, why would Congress enact 

policies that would effectively compound the problems underlying these concerns. 

especially without quality and outcomes measurements in place to ensure that 

beneficiaries are not receiving substandard care in a nursing home, relative to what 

they would receive in an IRF? 

Answer: The President's Budget proposal to equalize payments between IRFs and SNFs for 

certain types of patients is not requiring patients to be moved from one setting to another but to 

make payment more nearly equal for similar services provided in different post-acute care 

settings. One ofthe goals of the post-acute care proposals in the President's FY 2014 Budget is 

to encourage care delivery in the most clinically appropriate and cost-effective care setting. 

Under current law, the classification criteria for inpatient rehabilitation facilities (IRF) require 

that at least 60 percent of an IRf's patients need intensive rehabilitation services for treatment of 

one or more of 13 specified conditions. The President's Budget proposal to change this criteria to 

75 percent is to ensure that these JRFs are primarily furnishing services for patients who need 

intensive therapy and therefore eligible for the significantly higher payments for their patients. 

To help beneficiaries choose a quality nursing home. Medicare.gov has a Nursing Home 

Compare that has a Five-star rating system based on a nursing home's performance in health 

inspections, quality measures. and hours of care provided by nursing staff. This is an important 

tool for beneficiaries to ensure they choose high quality nursing home for their needs. 

3. In the past your agency has stated its priority to ensure diversity in the health 

professions as well as to ensuring health professionals practice in underserved 

communities. How do the cuts to Title VII in the agency's FY 2014 budget, which 

eliminate these programs, achieve the agency's diversity objectives and increase the 

number of diversity of health professions? 

Answer: While the FY 2014 Budget required difficult choices, it includes a strong commitment 

to HRSA 's priorities. Increasing the diversity of the health professions workforce is an area of 

focus for HRSA. For the most recent academic year. 46% of graduates from HRSA-funded 

programs were disadvantaged and/or underrepresented minorities. 

The FY 2014 budget request maintains fLlI1ding for several programs that specifically aim to 

boost the diversity of the health professions workforce: 

The Centers of Excellence program: This program assists eligible schools in supporting 

programs of excellence in health professions education for underrepresented minority (URM) 

individuals and to strengthen the Nation's capacity to produce a culturally competent healthcare 

workforce. COE grantees use grant funding to increase the pool of competitive URM student 

applicants: enhance URM students' academie performance; improve recruitment and retention of 

URM faculty: improve clinical education. curricula. learning resources and cultural competence 

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as they relate to minority health issues; and facilitate faculty and student research on health 

issues affecting URM groups. 

Scholarships for Disadvantaged Students program: The purpose of this program is to increase 

diversity in the health professions workforce by providing grants to eligible health professions 

and nursing schools for use in awarding scholarships to tlnancially needy students from 

disadvantaged backgrounds. 

Nursing Workforce Diversity program: The purpose of this program is to increase nursing 

education opportunities for individuals who are from disadvantaged backgrounds. including 

racial and ethnic minorities who are underrepresented among registered nurses. 

The National Health Service Corps (NHSC): 

The NHSC is a network of primary care providers serving communities with shortages of 

medical. dental. or mental/behavioral health care. The Affordable Care Act (ACA) significantly 

increased funding for the NHSC, which made it possible to nearly triple the number of clinicians 

in the NHSC, and broadened the NHSC's racial and ethnic diversity of doctors. nurses. and other 

health care professionals. For example: 

• NHSC African American physicians represent 17.3% of the Corps physicians and exceed 

their 6.3% share in the national workforce . 

• NHSC Hispanic physicians represent 16.2% of the Corps physicians and exceed their 

5.5% share in the national workforce. 

NHSC Asian dentists represent 14.7% of the Corps dentists and exceed their 11% share 

in the national workforce. 

Diversity is an integral part of the NHSC recruiting strategy. The NHSC is national in scopc and 

conducts outreach to target underreprescnted minorities for recruitment. Overall. NHSC 

participation compared to national workforce and student averages remain strong. 

In addition. other HRSA grants help increase diversity through eligibility requirements, funding 

priorities andior required activities, depending on the authorizing statute. These programs 

include. for example. the Primary Care Training and Enhancement program. the General, 

Pediatric and Public Health Dcntistry and Dental Hygiene Program. and the Mcntal and 

Behavioral Health Education and Training Grants program. and the Advanced Nursing 

Education program. The President's FY 2014 budget has maintained or requested additional 

funding to support these programs. 

4. NIH has recently acknowledged problems with thc availability of resources for 

awarding minorities with ROt grants. How will your agency deal with this issue in the 

midst of your proposed cuts to the Research Centers at Minority Institutions (RCMI) 

program at NIH's National Institute on Minority Health and Health Disparities 

program in the FY 2014 budget? 

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Answer: As a leader in scientific discovery and innovation, NIH not only recognizes the 

underrepresentation of individuals from underserved communities in biomedical research, but it 

is committed to supporting and developing a diverse cadre of scientists from all sectors of the 

nation. NIII has initiated the implementation of several recommendations from the Advisory 

Committee to the Director (ACD). which recently formed a Working Group on Diversity in the 

Biomedical Research Workforce. This working group was charged with evaluating the diversity 

of the biomedical research workf()rce and making recommendations to the ACD for 

improvemcnt in recruitment and retention. 

The FY 2014 NIH Congressional Justification includes a decrease for the RCM! program due to 

the need to balance the scientific investments of the National Institute on Minority Health and 

Health Disparities (NIMHD). by identifYing and reducing areas of duplication in its program 

portfolio. The RCMI program, along with other new and existing initiativcs, will bolster NIH's 

efforts to improve thc recruitment and retention of a diverse workforce. Recently, NIH launched 

three inter-related initiatives to address this issue. These are (I) NIH Building Infrastructure 

Leading to Diversity (BUILD), (2) the National Research Mentoring Nctwork (NRMN), and (3) 

thc Coordinating and Evaluation Center (CEC). In addition. a search is currently underway to 

recruit a ChicfOfftcer for Scientific Workforce Diversity. This individual will be responsible for 

enhancing the diversity of the NIH extramural and intramural biomedical research workforce. by 

identifying nevv and cffective, evidencc-based strategies to enhance diversity, and promoting 

synergy among existing programs. 

Programs such as BUILD, NRMN, CEC. RCMI, and other existing NIH programs will 

complcment one another and support NIH's efforts to enhance the diversity of the biomedical 

research workforce. By utilizing the synergy between these programs. NIH can move forward in 

cnhancing the diversity of the biomedical workforce, and maximize the return on investment 

from the availablc resourccs . 

• The BUILD initiative intends to test new. innovative approaches to recruitment and 

training of scicntists from diverse backgrounds. The emphasis is on development of 

culture-changing methods to motivate young scientists for carcers in biomedical research 

and to enable them to thrive in the NIH-funded environment. It will support research 

training at multiple career stages and promote faculty development at comparatively 

under-resourced institutions Vv"ith a concentration of students who receive Pcll Grants. 

This initiative recognizes the critical role that the faculty-studcnt relationship plays and 

intends to provide salary offset and other mcntor-promoting activities to enable 

outstanding mentors to work with students and train new mentors . 

• The NRMN is intended to augment local mentoring efforts for undergraduate students 

through junior faculty members by creating a national group of scientific leaders who are 

willing to serve as external mentors. The NIH intends to identify an entity that will 

engage and assemble multiple persons and/or professional organizations into a single, 

nationwide. consortium of mentors. The NRMN intends to develop contemporary 

methods to facilitate networking between mentors and mentees and also intcnds to 

promote face-to-face experiences as needcd. This initiative will address the standard 

wisdom that says that success depends 011 "who you know." by ensuring that contacts are 

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made between mentees and mentors with shared interests and by facilitating subsequent 

interactions . 

• The goal of the CEC is to assess efficacy ofthc new approaches being developed via 

BUILD and the NRMN and to disseminate lessons learned across the community at large. 

It will help ensure optimal coordination of the BUILD and l'\RMl'\ activities. minimize 

redundancy. and facilitate data tracking and analysis. 

The RCMI program provides resources for several critical areas of support for biomedical. 

clinical. behavioral. and social sciences research. Infrastructure development creates a 

foundation for the research enterprise through renovation/alteration of new research facilities and 

the development of specialized research support capabilities such as biomedical informatics and 

research design/biostatistics expertise. Instructive training and mentored research training 

experiences for early-stage investigators interested in health disparities research facilitate career 

advancement for junior faculty members. Together these activities address many ofthc 

challenges faced in promoting diversity in the biomedical. clinical. behavioral. and social 

sciences research workforce. RCMI institutions as well as other institutions supported through 

ongoing NIH-funded activities are expected to benefit from the innovative approaches being 

testcd through BUILD. the NRMN. and the CEC. 

NIH anticipates greater collaboration. partnership and networking among its various programs 

aimed at contributing to the diversity of the workforce. including but not limited to these 

programs. 

5. In regards to molecular pathology services in Medicare, CMS eliminated stacking 

payment codes last year in favor of a re-pricing process called "gap-fill" to establish 

pricing for these services. While these molecular tests provide the foundation for 

personalized medicine, the gap-fill process has resulted in a lack of transparency, prices 

below the cost of providing some tests, and unnecessary delays in payments from the 

MAC's to clinical labs. 

Would you please provide the Committee with a status report on the gap-fill process to 

date, in addition to what steps eMS plans to take to improve the gap-fill process in the 

ncar future to ensure adequate Medicare beneficiary access to molecular pathology 

services? 

Answer: As you know. CMS regularly uses Current Procedural Terminology (CPT) codes 

developed by the AMA in establishing payment rates for Medicare services. The AMA CPT 

Panel developed 114new CPT codes for CY2012 and CY2013 to replace multiple "stacking 

codes" (based on component steps) that were previously used to bill for molecular pathology 

tcsts. The old "stacking codes" were deleted at the end 0[2012 and are no longer available. 

The majority of the new codes were issued for CY 2012. but CMS decided to delay their use for 

a year to carefully consider whether they should be paid under the physician fee schedule (as 

physicians preferred) or the clinical laboratory fee schedule (as preferred by laboratories). After 

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requesting comments as pari of the CY 2013 physician fee schedule proposed rule, we finalized a 

policy to pay for these codes under the clinical laboratory fee schedule, with an additional 

payment available for interpretation by a physician under the physician fce schedule. 

New rates for these tests are being established through the "gapfllling" process, which enables 

the local Medicare contractors to usc a wide range of relevant data to determine payment 

amounts for these tests. CMS will then use the contractors' gapfill prices to set "national 

limitation amounts" for these tests. The contractors' prices were submitted to CMS in April and 

will be posted on the CMS website in May and open for public comment for a 60-day period 3 

CMS will post final payment amounts in September, at which point stakeholders have 30 days to 

request reconsideration. The 2014 clinical laboratory fce schedule. including national limitation 

amounts for the new test codes. will be issued in November. 

While this process is underway, these molecular pathology tests are being paid at interim rates 

set by the contractors. whieh may reneet invoice amounts. the previous price amounts known as 

"stacking codes." or case-by-ease determinations by the contractor medical directors. CMS has 

asked laboratories to bring to our attention any areas where the Medicare contractors have not 

taken action on submitted claims. As indicated above. a 60-day public comment process is 

cUlTently underway on the prices proposed by the contractors. We urge laboratories to bring cost 

information to our attention to assist with final pricing of these services over the next several 

months. As we obtain more information on the costs of these services from laboratories, we are 

optimistic that we will be able to establish prices satisfactory to both Medicare and the laboratory 

industry. 

The Honorable Phil Gingrey 

1. Why does the budget propose excluding certain services from the in-office ancillary 

services exemption (IOASE) when both thc GAO and MedPAC reviewed the exception 

and did not recommend closing it? 

Answer: The in-office ancillary services exception was intended to allow physicians to se1t~ 

refer for services to be performed by their group practices for patient convenience. While there 

are many appropriate uses for this exception. there is evidence that suggests this exception may 

have resulted in overutilization and rapid growth of certain services. In a report released last 

September. GAO found that in that in 20 I 0, providers who self-referred likely made 400.000 

more referrals for advanced imaging services than they would have if they were not selfreferring. GAO found that these additional referrals cost Medicare about $109 million. 

, Infannation on the current 60-day public comment process is available at hlll2:!'WW\~.C11ls.'wv'\ledicare!Medicarc­

[ee-for-ScI'\' i ce-f'a\,lllent 'CI i n ica I La b F eeScbed 'Gap fi 11- Pricin g-Inqu i ries. h tIllt. 

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2. Recent MedPAC data suggests that the growth of advanced diagnostic imaging services 

has slowed in recent years. If this is the case, why does this budget include provisions to 

eliminate imaging services from the in-office ancillary services exception? 

Answer: It is true that MedPAC's March 2013 report stated that utilization rates for imaging 

services slightly declined in 2010 and 20 II. However, the report also stated that despite the 

decrease in 2010 and 2011, the use ofimaging services has remained much higher than it was a 

decade ago. The cumulative decrease in imaging volume in 2010 and 20 II was less than 4 

percent, while the cumulative increase that occurred from 2000 to 2009 was 85 percent. 

According to MedPAC, the growth in imaging volume last decade was more than double the 

cumulative growth rates for evaluation and management (E&M) services and major procedures 

respectively. During this period, many physicians have been outspoken about the overuse and 

duplication of these services. Other studies have supported this assertion. From this strong 

evidence, the Administration feels that it is appropriate to include advanced imaging in the list of 

services that should be excluded from the in-office ancillary services exception. 

3. How are the "accountability standards" defined that would allow providers to continue 

providing services under the IOASE? 

Answer: This proposal allows the Secretary flexibility to determine these standards, which 

would be done through a rulemaking process. Factors to be considered could include quality, 

value, efficiency, utilization, and access. 

4. The ability for physicians to provide ancillary services in the office setting achieves both 

lower cost treatment and increased care coordination. Are yon concerned that closing 

the IOASE will result in higher costs and fragmented patient care? 

Answer: The in-office ancillary services exception was intended to allow physicians to selfrefer quick turnaround services. While there are many appropriate uses for this exception, the 

services covered under this proposal are rarely performed on the same day as the related office 

visit. Additionally, there is reason to believe this exception has resulted in the overutilization and 

the inappropriate use of certain services. Receiving unnecessary tests, such as additional CTs, 

can actually pose risks to beneficiaries. This proposal is designed to encourage appropriate use of 

services while providing exceptions (to be specified by the Secretary) that would ensure 

beneficiaries continue to have access to appropriate, medically necessary care. 

5. As an obstetrician and gynecologist, I know how important it is for OBGYNs to have 

up-tn-date nutrition advice based on the latest science, and doctors look to FDA for that 

advice. Unfortunately, FDA's advice to pregnant women on seafood consumption is far 

outdated, leaving expectant mothers with old information that has resulted in a decline 

in seafood consumption to the detriment offetal development. You've been saying for 

over two years that the advisory to pregnant women on seafood consumption will be 

updated. As FDA continues to miss deadlines for releasing the advice, it is time that you 

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personally engage in the finalization process to get this advice out. Would you provide 

an update on the seafood advisory's status and commit to completing the final advice by 

this summer? 

Answer: The Food and Drug Administration (FDA or the Agency) first issued fish consumption 

advice relating to methylmercury in 1994. The advice was updated in 2001 and again in 2004. 

The 2004 advice was issued jointly by FDA and the Environmental Protection Agency (EPA). 

Its purpose was to protect against the possibility ofneurodevelopmental harm to the fetus and to 

infants from methylmercury as a result of their mother's consumption offish in excess of 

recommended amounts and to protect young children fi'om the possibility of neurodevelopmcntal 

harm from methylmercury as a result of their own consumption offish. Since then. studies 

published in the scientific literature indicate that. under certain circumstances. fish consumption 

by pregnant women and young children may actually improve neurodevelopment. The Dietary 

Guidelines for Americans 2010. the government's nutritional recommendations issued every five 

years by the Departments of Health and Human Services and Agriculture. have already taken this 

development into account by recommending that pregnant and nursing women eat at least 8 and 

as much as 12 ounces per week of fish lower in mercury. The 2004 FDA/EP A advice does not 

contain this consumption target nor does it mention a potential neurodevelopmental benefit from 

fish since the evidence tor it did not exist in 2004. We have devoted a significant effort to update 

the advice and to complete a quantitative assessment of the net effects of fish consumption 

during pregnancy on neurodeve!opmcnt in order to have a sound analytical underpinning for that 

advice. We are making every effort to complete that process as soon as possible and please be 

assured that your concerns are being taken into account. 

The Honorable Cathy McMorris Rodgers 

1. This Committee has spent a great deal of time reforming the way pharmacies are paid 

for generic drugs in the Medicaid program. 

The Deficit Reduction Act, and later the Affordable Care Act, established that Average 

Mannfacturer Price (AMP) would be used to set Medicaid Federal Upper Limits (HILs) 

for pharmacy reimbursement. Because AMP has never been used in this mauuer, 

Congress gave CMS flexibility to increase the multiplier to calculate FULs, should they 

prove to provide insufficient payment to retail pharmacies. 

As you know, CMS has been publishing AMP-based FULs in draft form on a montbly 

basis, and the pharmacies in my districtlstate tell me that the FULs change dramatically 

in valne from month to month, and that in many cases they are below pharmacy's cost 

to purchase these medications. 

Given this is a new reimbursement model that has yet to be fully tested in the 

marketplace; it seems premature to make any changes. 

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(a) Consequently, I was surprised to see the provision in the president's budget, 

"Lower Drug Costs" that alters the way FULs are to be calculated. I am also 

surprised that CMS has chosen to ignore the authority granted by Congress 

to incrcase the multiplier to calculate FULs if necessary. Why has the 

Administration proposed this change to the calculation ofFULs? 

Answer: The Medicaid Federal Upper Limit (FUL) is used to limit reimbursement for certain 

multiple source drugs. and is currently calculated based on the weighted average price of all 

brand-name. authorized generic. and other multiple source generic drugs for each product. This 

proposal removes brand and authorized generic prices from the FUL calculation. Currently. the 

inclusion of both brand and authorized generic drugs in the calculation of the FUL unduly 

inflates the FUL. Removing both categories of drugs ensures that the government remains a 

prudent purchaser of prescription drugs. 

(b) What portion ofthc $8.8 billion in savings from this budget provision is 

attribntcd to reduced pharmacy paymcnts? 

Answer: The Medicaid prescription drug proposals in the President's FY 2014 Budget 

strengthen the fiscal management of the Medicaid program. If enacted. we estimate the proposals 

will save money by bringing down FULs that are inflated by generic prices. To the extent that 

pharmacy payments may be reduced. the reduced payment will more accurately reflect the price 

of the generic drugs tor which Medicaid pays. 

(c) Why has CMS chosen to disregard the authority provided by Congress to 

increase the multiplier to set Federal Upper Limits, even on a casc by case 

basis? 

Answer: CMS has issued monthly draft AMP-based FULs and three-month rolling average 

FULs. The draft three-month rolling average FULs were developed in response to comments that 

the draft AMP-based FULs fluctuated from month to month. States can use the draft monthly 

AMP-based FUL. or the draft three-month rolling average FUL. once they are finalized. 

depending on the approved state plan. to develop a pharmacy reimbursement methodology that 

will allow their pharmacy payments to remain within the FUL in the aggregate. CMS is 

continuing to accept comments on these methodologies and will consider those comments when 

we finalize the FULS. Based on recent work by the OIG and the GAO. we continue to believe 

the FULs will provide sufficient payment to retail pharmacies. 

2. Under the mandate requiring all insurance plaus cover stcrilization and contraceptiou 

including the morning-after and weck-after pills, many non-profits and family owned 

businesses will no longer be able to operatc in keeping with thcir principles and values, 

whilc also offering health iusurance to their employees. Because you have not provided 

an excmption that fully respects religious freedom, over 160 plaintiffs have filed suit 

against this mandate--seeking the courts grant them relieffrom the mandate that 

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infringes of their fundamental Constitutional rights. The family owned business' eases 

are moving fon\'ard, but the non-profits' eases are delayed until a final rule is issued. 

Sinee both the advance notice of proposed rulemaking and the proposed rule have been 

similarly rejected by religious objectors, they have little hope that the final rule will 

address their concerns. Therefore, they expect to be forced to rely on relief in court. 

However, their cases cannot move fonvard until the rule is finalized. 

(a) Faith-based charities, hospitals and schools are still waiting for their day in court, 

waiting for a final rule, and time is running ont for them-they must comply 

starting August 1 st of this year with the mandate or face ruinous fines. When will 

HHS issue the final rule, so that these faith-based charities, hospitals and schools 

wbo want to provide good health care to their employees and continue to keep that 

health care in line with their deeply held beliefs can go to court and protect their 

religious liberty? 

Answer: This rule was published in the Federal Register for public comment on February 6, 

2013. The deadline for commcnt submissions was April 8, 2013. HHS is still examining 

comments and expects to issue a final rule when we have completed our analysis and response to 

comments. 

(b) As I mentioned previously, Americans have been seeking redress through the courts 

because the administration continues to push forward a rule that violates deeply 

held moral and religious beliefs. In issuing a final rule, will you seek to protect the 

First Amendment rights of all Americans? 

Answer: HHS cannot comment on the contents of any final rule before it is released to the 

public. 

The Honorable Leonard Lance 

1. Mueh has heen made about the issue of drug rebates to the Medicare program. This 

eommittee has done much work in exploring the ways in which Medicare Part D drugs 

have kept down costs in the Medicare program. In proposing to apply Medicare drug 

rebates to the Medicare program, did your office conduct an analysis to ascertain what 

impact on innovation or access these rebates might have? 

Answer: The Medicare Part D program is working well and providing valuable savings to 

seniors and people with disabilities with their prescription drug costs, particularly for dually 

eligible Medicare-Medicaid beneficiaries who automatically receive Extra Help from the 

government with their premiums and copayments. Given the fiscal challenges our country faces. 

however, Medicare must continue to find ways to ensure the program is providing the best value 

to beneficiaries and taxpayers. 

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The FY 2014 budget proposal would obtain price concessions from pharmaceutical 

manufacturers for individuals who are dually eligible and for the poorest Medicare beneficiaries. 

who receive the Part D Low Income subsidy. The Part D Low Income Subsidy (LIS) is the 

largest component of Part D spending, totaling $22.8 billion in 2012. These price concessions, or 

rebates, are the same rebates that the Medicaid program currently receives from manufacturers. 

This proposal stems from a recommendation by the bipartisan National Commission on Fiscal 

Responsibility and Refonn and reinstates savings that taxpayers previously received when dually 

eligible individuals received their drug benefit through the Medicaid program. 

2. The proposed budget would seek to expand Medicare claims data sharing with 

qualified entities for snch pnrposes as fraud prevention. Would you explain how this 

policy would work? 

Answer: The Affordable Care Act includes a provision that allows CMS to make Medicare P31t 

A, B. or D claims data available to qualitied entities for the purpose of publishing reports 

evaluating the performance of providers and suppliers. The budget proposal would expand the 

scope of how qualified entities can use Medicare data beyond simply performance measurement. 

For example. entities would be allowed to use the data for fraud prevention activities and valueadded analysis for physicians. In addition, qualified entities would be able to release raw claims 

data. instead of simply summary reports. to interested Medicare providers for care coordination 

and practice improvement. 

Qualified entities (QEs) offer a unique mechanism for CMS to share data with providers. Many 

of the organizations that have been approved as QEs were already doing provider performance 

measurement, so have established rclationships with providers in their region. In many cases, 

these organizations already share claims data from other payers with providers, offering not only 

access to the data, but also value-added analytics. Many QEs charge for their value-added 

analytics; however, this offers an important service to providers, who don't necessarily have the 

infrastructure to store and analyze raw claims data. which allows them to gather further 

information on the quality of care they deliver. 

3. Citing concerns with the way CMS has handled fraud prevention to date, and alarmed 

by the tens of billions CMS loses to waste, fraud and abuse each year, this committee 

recently put out a proposal on its intention to identify and reform the ways in which 

CMS manages fraud prevention. Yet the President's budget wonld request that fraud 

prevention funding in 2015 be mandatory aud fall outside of Cougressional oversight. 

Would you explain how giving CMS more autonomy with regards to fraud funding will 

help address concerns on capitol hill that CMS is not properly conducting fraud 

prevention in the Medicare and Medicaid programs? 

Answer: CMS launched the Fraud Prevention System (FPS) as part of a broad effort to shift the 

agency beyond a "pay and chase" approach to preventing fraud before it happens. Created under 

the Small Business Jobs Act of2010, the FPS analyzes all Medicare fee-for-service claims using 

risk-based algorithms developed by CMS and the private sector, prior to payment, allmving CMS 

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to take prompt action where appropriate. CMS uses the FPS to target investigative resources to 

suspect claims, providers, and suppliers, and swiflly impose administrative action when 

warranted. Early results from the FPS show significant promise and CMS expects results to 

increase as the system matures over time. As reported in our Report to Congress in its first year 

of implementation. the FPS: 

• Prevented or identified an estimated $]15.4 million in improper payments; 

• Achieved a positive return on investment, saving an estimated $3 for every $1 spent in 

the first year; 

• Generated leads for 536 new fraud investigations; 

• Provided new information for 5]1 existing investigations; and 

• Triggered 617 provider interviews and 1.642 beneficiary interviews regarding suspect 

claims or provider activity. 

In addition to CMS' fraud prevention work, HHS and DOJ continue to coordinate investigations 

and prosecutions of health care fraud, waste. and abuse under the Health Care Fraud and Abuse 

Control Program (HCFAC). As reported in the 2012 HCrAC Report to Congress, these activities 

returned $4.2 billion dollars to the Department of Treasury and Medicare Trust Funds in 2012. 

The HCr AC account has returned over $23 billion to the Medicare Trust Funds since the 

inception of the program. 

The Budget Control Act of2011 recognized that a multi-year strategy permitting agencies to pay 

closer attention to the risk of improper payments. commensurate with the large and growing 

costs of the programs administered by that agency, is a laudable goal. Despite enactment of these 

multi-year discretionary cap adjustments. annual appropriations bills have not provided the full 

amount of program integrity funding authorized in BCA. Billions of dollars in savings over the 

next ten years from curtailing improper payments will not be realized if consistent. additional 

funding for program integrity is not provided. The President's Budget proposes to provide a 

dedicated, dependable source of additional mandatory funding beginning in FY 2013 that will 

ensure HHS and the Department of Justice (DOJ) have the resources that they need to conduct 

necessary program integrity activities and make certain that only the right people receive the 

right payment for the right reason at the right time. CMS will continue to report to Congress on 

program integrity efforts. 

The Honorable Bill Cassidy 

1. In 2006, government-fnnded patient advocates coached schizophrenic William Brnce to 

say the right things in order to be released from a psychiatric faeility- despite his 

doctor's recommendation. Two months later, he mnrdered his mother with a hatchet. 

Today, he is receiving effective treatment (inclnding medication) and lives in a state 

psychiatric facility. (See "A Death in the Family" in the WSJ). He is quoted as saying of 

the advocates, "They helped me immensely with getting out of the hospital, so I was 

very happy (but) the advocates didn't protect me from myself." It seems the patient 

advocates (who are fnnded to protect against patient abnse and neglect) do a better job 

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advocating for the irrational and often dangcrous voiccs of the disease than advocating 

what is in the best interest of the individual. I see the bndget will again allocate 36 

million to this program. What has been done since the 2006 death of this boy's mother 

to prevcnt government funded patient advocates from coaching seriously mentally ill 

individuals, who are clearly in need of treatment, to forego it to their detriment, their 

families and their communities? 

Answer: Protection and Advocacy for Individuals with Mental Illness (PAlMI) project officers 

and grants management staff provide routine fiscal. programmatic and monitoring oversight of 

all aspects of the PAlMI formula grants within states. In this capacity, the project officer and 

monitors work to ensure that the federal PAlMI funds are being utilized consistent with the 

statutory authority and in compliance with the PAlMI applications' requirements and annual 

program priorities that are established by the respective PAlMI Advisory Councils. 

SAMHSA receives allegations and complaints relating to health and safety concerns trom both 

the HHS Office oflnspector General Hotline and directly from the general public. Upon receipt. 

SAMHSA's allegations point of contact convenes a meeting with appropriate program officials 

who communicate with and gather information from the grantee in question and take appropriate 

actions. which may include a site visit and corrective action plan depending on the 

circumstances. 

2. Assisted Outpatient Treatment (AOT, also known as outpatient commitment or 

"OPC") allows a judge to order an individual with serious mental illness, who is unable 

to live safely without supervision and treatment, to follow a treatment plan while living 

in the community. In 2010, NIMH director Thomas Insel wrote, "One of the challenges 

we face in correcting (the problem of SMI individuals ending up in jail) is the absence 

of an institution for longer-term, evidence-based care for people with severe mental 

illness." With state psychiatric hospital beds being elosed every day, AOT not only 

provides what Insel was describing, but also provides it in a way that allows an 

individual to remain in the less restrictive setting of his/her community. Unfortunately, 

lawyers paid by SAMHSA's PAlMI program actively advocate against programs like 

AOT despite the fact that the DOJ rates the program as a cost-saver and crimepreventer. \Vhile a small subset of people with severe mental illness are at significant 

risk of committing violent acts (including homicide and suicide) at far higher rates than 

national averages, research has shown that those with schizophrenia and other severe 

psychiatric diseases are no more violent than those without SMI if their psychosis is 

controlled. What is SAMHSA doing to address the needs of seriously mentally ill 

individuals whose brain disease prevents the person from voluntarily seeking treatment 

before they end up in the criminal justice system? Please provide a detailed list of 

SAMHSA funding that has supported implementation of evidence-based AOT/OPC 

programs over the last ten years. If no funding or limited funding has gone to these 

programs, please explain why. 

Answer: AOT/OPC is a form ofleveraged. court ordered treatment. Since 2002. SAMHSA has 

supported court-ordered treatment through the Grants for Jail Diversion Program. Jail diversion 

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programs are aimed at persons who have mental illness. who have violated a law. and who can 

improve with treatment and support. In alignment with the authorizing language (Section 520G 

of the Public Health Service Act), Rcquests for Applications have announced funding 

opportunities to states. municipalities and tribes to divert individuals from incarcerated settings 

to comprehensive community based mcntal health and recovery oriented services. Communities 

proposed and implemented grants to support screening and community treatment for individuals 

with mental illness and co-occurring substance use disorders who were diverted at police 

encounter, after arrest and booking. in pre-screening, at first appearance in court. in mental 

health courts and at violation of probation and parole. Mental health courts issue court-ordered 

treatment to individuals with mental illnesses and monitor progress at regular hearings. offering 

rewards or sanctions depending on whether or not participants are adhering to their treatment 

plans and other conditions. 

Based on funding appropriated by Congress for the SAMHSA Center for Mental Health Services 

Criminal and Juvenile Justice Program Summary Listing of Activities line. during FYs 2003-

2012. a total of$56.4 million was spent on the Grants for Jail Diversion Program. 

3. The President's bndget requests $1.5 billion in new funding for federal fallback 

exchanges (FFEs). This includes $554 million in "education and outreach." Congress 

denied the request for SI billion additional funding for FFEs in last year's continuing 

resolution. Without eongress providing these funds, how are you funding federal 

exchanges'! Please provide a detailed accounting chart of what internal accounts the 

money is coming from. 

Answer: The President's Budget requests $1.5 billion for the Federal Marketplace. CMS is 

committed to carrying out the Secretary's ongoing statutory responsibility to establish and 

operate a Federally-Facilitated Marketplace in states that do not elect to establish and operate 

their own Marketplaces, or that the Secretary determines will not have any required Marketplace 

operational by January 1,2014 or that have not taken the actions she determines necessary to 

implement the requirements for operating a State-Based Marketplace. 

4. In August 2012, CDC found that three-fourths of all persons infected with Hepatitis-C 

are among the baby boom birth cohorts, with the vast majority unaware of their 

infection, and recommended that every boomer get screened once in their life 

regardless of risk factors (risk based screening was deemed of "limited success. ") 

Meanwhile a sister agency, the U.S. Preventive Services Task Force (USPSTF), issued 

its draft guidelines for HCV screening that wants to continue on using risk-based 

screening and ignores the high density of HCV positive people in the baby boom 

generation. The ACA requires health plans to follow the USPSTF guidelines. HCV 

costs are about to explode on Medicare-even though it's easy to test and then treat 

these populations, with upcoming treatments literally curing people of the disease while 

safety and efficacy increase. What is the Secretary office doing to navigate and head off 

this looming medical and fiscal crisis? 

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Answer: In regard to Medicare coverage of screening for Hepatitis C Virus amongst the baby 

boom birth cohort. CMS has limited authority to consider coverage of new preventive and 

screening services. Specifically. the Medicare statute authorizes the Secretary to add coverage of 

"additional preventive services" that is. preventive services not already covered under specific 

statutory provisions - if the service is recommended at the "A" or "B"' level by the U.S. 

Preventive Services Task Force (USPSTF). and the service is determined through the Medicare 

national coverage determination (;..iCD) process to be appropriate for Medicare beneficiaries. 

As you noted. the USPSTF recently initiated a reconsideration of their 2004 recommendation on 

routine screening for Hepatitis C Virus and issued a draft updated recommendation for public 

comment in November 2012. Until the USPSTF issues a final recommendation, Medicare lacks 

authority to consider coverage of this service. When a final recommendation is available. we will 

consider whether it warrants the opening of a national coverage analysis (the first step in the 

NCO process). The status of the Task Force's work on this subject can be monitored at 

http://www.uspreventiveservicestaskforce.org/uspstt7uspshepc.htm. 

In regard to the Affordable Care Act provision for private insurance coverage ofprevcntive 

services recommended by the llSPSTF, the law requires that non-grand fathered plans cover 

services with an A or B recommendation without cost-sharing. Screening for Hepatitis C does 

not currently have an A or B Recommendation from USPSTF. and it is therefore not required to 

be covered. 

5. The President's Budget demonstrates that the ACA will take over much of the medical 

serviees of HIV patients, currently provided by Ryan White funded programs. From 

current levels, by what amount are Ryan White expenditures expected to decline, and 

how does the Administration intend to devote those 'surplus' dollars to achieve the 

stated goals of the national IIIV strategy, advance public health and reach an AIDs-free 

generation? If there are 'surplus' funds, are those funds not best deployed on core 

medical services and infrastructnre strengthening in areas where there are growing 

populations of HIV patients or eontinued implementation challenges due to resourcepoor setting? The Ryan White Treatment Act calls for 75 percent offunds to be 

devoted to core medical services. Is it the Administration position that this threshold is 

110 longer prudent or necessary? 

Answer: The FY 2014 Budget request reflects continued support for the Ryan White HIV/AIDS 

Program (RWHAP) while HHS conducts an in-depth assessment of the interaction between the 

Affordable Care Act and RWHAP's continued provision of HI V services, and the potential for 

achieving one of the key goals of the National HlV/AIDS Strategy (NHAS): improving hcalth 

outcomes for people living with HlV/AIDS. 

While HHS does not expect a significant shift in the demand for clinical services in FY 2014. 

nonetheless, HHS does expect that in FY 2014 the number of insured Ryan White clients is 

expected to increase to some extent. The FY 2014 Budget also supports investments in Ryan 

White funded services not covered by public or private insurance, but which are essential to 

linking people living with HIV into care and maintaining them on drug regimens. These 

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"continuum of care" services are critical to preventing the spread orthe domestic mv epidcmic 

as recent studies have found that anti-retroviral (ARV) treatment reduces HIV transmission by 

96 percent. Examples of these services include case management, transportation assistance, and 

treatment adherence, which are critical to keeping people in care and on drug regimens that 

decrease viral load and prevent the spread of the virus. Ryan White dollars are also used to 

support cost sharing, which leads to more consistent access to ARV drugs and increased 

adherence to treatment. Ryan white grants are also used by clinics to fund several core medical 

services not consistently covered by insurance, including comprehensive substance use 

treatment. mental health services. and care coordination services 

The Ryan White Program plays an essential role in meeting the goals of the NHAS and 

supporting its objective to reach an AIDS-free generation through the Program's critical role in 

filling gaps in the health system and its unique capacity. experience, and expertise in meeting the 

diverse and challenging health care needs ofPLWH.lfthe NHAS goals are to be met, Ryan 

White Program funds must continue to be used to support care completion services (core medical 

and continuum of care services) for both newly diagnosed individuals and current clients who 

will be enrolled in Medicaid or private insurance options beginning in January 2014. The Ryan 

White Program not only works to ensure that individuals living with HIV gain access to care and 

life-saving anti-retroviral (ARV) drug treatment, it also works to ensure that people remain in 

care and adhere to their ARV drug regimens. Because ARV treatment suppresses the virus 

thereby reducing its transmission by 96 percent, the Ryan White program also plays a critical 

role in preventing the spread of the HIV epidemic. 

By statute, the majority of Ryan White Program funds are distributed by formula with smaller 

amounts distributed as supplemental awards based on demonstrated needs in resource-poor 

settings. As noted earlier, based on what the Department learns from its assessment of the impact 

of the Affordable Care Act on the Ryan White Program, we will be better able to address 

challenges and future opportunities lor changes. 

The Ryan White HIV/AIDS Program legislation (title XXVI of the Public Health Service Act). 

requires that grantees expend 75 percent of Parts A, B. and C funds on core medical services, 

including antiretroviral drugs, for individuals with HIV/AlDS identified and eligible under the 

statute. The statute grants the Secretary authority to vvaive this requirement if there are no 

waiting lists for the AIDS Drug Assistance Program and core medical services are available to 

all individuals identified and eligible an applicant's service area. A Federal Register Notice 

(FRN) was published on May 24. 2013, that offered a proposed revision to the waiver policy for 

public comment. The FRN supports the Ryan White Program grantees' request for additional 

flexibility in the timing of waiver applications by providing grantees additional options for 

making waiver requests. HRSA will review the information from the comments to inform future 

action on the waiver. 

6. As you know GAO and MedPAC have examined the in-office ancillary Service 

Exception in depth and neither group has recommended repealing IOASE. I am 

concerned that the Administration proposal would result in more patients receiving 

care in the more expensive hospital setting, undermining the integrated delivery of care 

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and leading to more hospital acquisitions of physician practices. Would you provide the 

quantitative analysis that supports the $6 billion score for the proposal? How much is 

attributable to each service? 

Answer: The estimate of$6 billion in savings was developed by the independent CMS Office of 

the Actuary based on its assumptions about predicted reductions in spending on services and 

behavioral changes related to the policy. 

7. With regard to radiation, are you aware that radiation utilization from 2007-2011 has 

been flat at the precise time physician offices have acquired the IMRT technology? 

Doesn't that suggest tbat there would be no savings from prohibiting physician 

ownership of radiation? 

Answer: The in-office ancillary services exception was intended to allow physicians to selfrefer quick turnaround services. While there are many appropriate uses for this exception. certain 

services. such as advanced imaging and outpatient therapy. are rarely performed on the same day 

as the related physician office visit. Additionally, evidence suggests that this exception may have 

resulted in overutilization and rapid grO\vth of certain services over time. including radiation 

therapy. Effective calendar year 2015. this proposal would seek to encourage more appropriate 

use of select services by amending the in-office ancillary services exception to prohibit certain 

referrals for radiation therapy, therapy services. and advanced imaging except in cases where a 

practice meets certain accountability standards. as defined by the Secretary. 

The Honorable H. Morgan Griffith 

1. Back in 2011, I asked your former colleague in the Cabinet, EPA Administrator Lisa 

Jackson, about the impacts of the administration's burdensome regulations would have 

on my poor and elderly constituents in Southwest Virginia by raising their heating 

prices. She responded along the lines of that there are programs to help those people. 

The President proposed to slash the Low Income Home Energy Assistance Program 

(LIHEAP) by $650 million from FV12 levels. I cannot fathom how this administration 

can push through policies that raise energy costs while suggesting that programs like 

LIHEAP be cut. How will people needing this assistance that have had their energy 

costs exacerbated by other policies from this administration survive without these 

LIHEAP funds? 

Answer: While the Low Income Home Energy Assistance Program (LiHEAP) remains an 

important program to the Administration, difficult budgetary choices need to be made across the 

board and new approaches have to be used to more strategically target resources where they are 

most needed. The Administration recognizes the importance of ensuring that grantees (States, 

Tribes. and Territories) retain as much flexibility as possible with their budget decisions for 

LIHEAP in terms of setting benefit levels and eligibility criteria. 

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For FY 2014, the Administration proposed a new funding stream of$50 million to assist 

L1HEAP grantees with repairing and replacing inefficient heating systems to help enable 

households to reduce their home energy burden and maximize the impact of their L1HEAP 

benefits. This pilot program will provide evidence orthe effectiveness of different strategies to 

improve home energy efficiency and reduce home energy burden for low-income households. 

The Honorable Gus Bilirakis 

1. First, in eMS's 45-day notice were changes made to thc Medicare Advantage (MA) risk 

adjustment methodology? Do those changes in effect reward private plans for delaying 

patients' access to disease management programs and do you believe that this payment 

policy aligns with the President's stated priority, published in his own budget, to 

implement payment innovations that reward high quality care? 

Answer: eMS understands the clinical value of disease and care management programs in 

targeting conditions early and preventing or slowing the progression of disease, improving the 

health of beneficiaries, and potentially saving health care costs. The goal of risk-adjusted 

payments is to pay accurately using the appropriate relative risk for a beneficiary. Therefore, a 

key objective when we develop or update a risk adjustment model is to measure risk in the best 

way possible. 

CMS balanced several goals when updating the CMS-HCC model for the Medicare Advantage 

program. One significant goal of the revised model was to conduct a JI'esh model build in order 

to clinically revise the model. Though eMS annually maps new ICO-9 codes into the existing 

HeCs, the base groupings in the CMS-HCC model are still based on ICO-9 codes from the late 

19905. CMS has not conducted a fresh model build since the model was created. Thus, a key 

feature of the proposed restructuring of the condition categories proposed for CY 2014 was 

achieved by taking into account ICO-9 codes that have been created in the decade since the 

original model was created. We also considered whether the condition categories predict 

expenditures, whether the diagnostic classifications measure disease burden, and whether 

diagnosis codes subject to discretionary or inappropriate coding should be excluded. 

The risk adjustment model proposed for 2014 includes important clinical updates, as well 

changes to address differences in coding between MA plans and fee-for-service Medicare. 

Because of the concern regarding these risk adjustment changes being implemented at the same 

time as other program changes. the Final Rate Announcement substantially modified how we 

will implement the new risk model. 

In the Final Rate Announcement, we announced that we will implement the updated, clinically 

revised CMS-HCC risk adjustment model proposed in the Advance Notice with the following 

differences: (I) we will not apply a budget neutrality adjustment to the denominator and (2) we 

will blend the risk scores calculated using this model with the risk scores calculated using the 

2013 CMS-HCC model, weighting the risk scores from the 2013 CMS-HCC model by 25 

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perccnt and the risk scores from the 2014 CMS-HCC model by 75 pcrcent. We tlnalized this 

approach to mitigate the changes in risk scores faeed by individual MA organizations. 

2. Second, I am concerned about further changes to the MA program. Your colleague Ms. 

Tayenner stated at her Senate confirmation hearing that MA provides high quality 

coverage to beneficiaries who are satisfied with their coverage. I can say first hand that 

MA enrollees in Florida, with a penetration rate of 34%, would agree with that 

statement and truly value their ability to access private plans. 

HHS's FY2014 budget proposed severe changes to the coding intensity adjustment for 

MA, raising it from 0.25 percentage poiuts to 0.67 percentage points until the minimum 

adjustment plateaus at 7.59% in 2018. This is significantly higher than current law; 

under ATRA the adjustment plateaus at 5.9%. The ATRA increased the 2018 

ad.justment level over time from what was established uuder the ACA at a 5.7% 

adjustment in 2018 and beyond. 

In light of ACA's deep funding cuts to the program (most of which have yet to take 

effect) and the way the proposed cuts included in eMS's draft 45-day notice were found 

to jeopardize stability within the program (and since have been reevaluated), why does 

the agency find it prudent to increase the coding intensity adjustment at such an 

accelerated rate from what we have seen in the past? 

Answer: The legislative proposals in the President's FY2014 Budget related to coding intensity 

adjustments and MA employer group waiver plans (EGWPs) are designed to improve the 

accuracy ofMA payments. 

The proposal to increase the MA minimum coding intensity adjustment would improve the 

accuracy of statutorily required risk adjustment ofMA payments that accounts for the health 

status of each MA-enrolled benctlciary. MA plans tend to submit both more diagnosis codes and 

higher levels of diagnosis codes for beneticiaries with similar underlying hcalth status than 

providers in FFS (and this difference between MA and FFS diagnosis codes increases over time). 

Beginning in 20 I 0, the ACA requires eMS institute a minimum coding intensity payment 

adjustment for MA plans. The coding intensity adjustment is applied as a downward adjustment 

to beneficiaries· risk scores in each MA plan. In a March 2013 repol1 the Government 

Accountability Office estimates that the coding intensity adjustment has been insufficient to 

account for the differences in coding between MA plans and fee-for-service Medicare4

• This 

budget proposal is consistent with the GAO recommendation and reduces overpayments to plans 

resulting from coding pattern ditferences between MA and Medicare FFS providers. 

3. The Agency's budget also reduces funding to MA employer plans in which about 1 

million beneficiaries are currently enrolled. Employers are already stretched thin by 

strict cost sharing mandates under ACA for their active workforce aud the potential 

4 http://www.gaogov!assets(590(587637.pdf 

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buy-up in coverage to meet the EHB requirements in 2014 under the President's health 

law. What kind of impact could this funding reduction have on employers? Will it 

result in reduced benefits or potentially impact wages or job creation? Would you 

agree that this policy docs not fulfill the "fundamental compact" the President's 

rhetoric would indicate he is committed to defend'! 

Answer: The President's FY2014 budget also proposes to set the base Part C payment amount 

for EGWPs in each county using the average standardized bid for individual plans in the county. 

EGWPs contract directly with employers and therefor have different bidding incentives irom 

individual MA plans. CMS has found in recent years that the projected average risk scores for 

EGWP members were lower than for individual MA plan enrollees. However. the average 

EGWP bids were higher than those for individual MA plans. MedPAC also believes that 

payments for EGWPs could be made more accurate. The proposal would align MA payment 

policy for EGWPs more closely with Part D payment policy. which sets Part D payments to 

EGWPs based on the national average Part D bid amount and the national base beneficiary 

premium. not on Part D bids submitted by EGWPs. EGWP payments in both Parts C and D will 

be established on a set. prospective basis rather than letting EGWPs bid for their Part C payment 

level. 

4. Do you believe you have sueh authority to shift funds between HHS accounts to cover 

expenses related to implementation of the health care law? If so, would you please 

provide a list of the authorized accounts you believe you have the ability to make such 

transfers for implementation purposes? Would you provide an accounting of what 

fnnds have been transferred or used for such purposes? Please provide a legal analysis 

for such authority. 

Answer: flHS has used the following authorities to transfer funds between HHS appropriations 

in FY 2013, which includes monies from the Nonrecurring Expenses Fund (NEF). the PPHF. and 

amounts transferred under the HHS Secretary's transfer authority. Some, but not all, of these 

transferred funds are being used in accordance with their relevant statutes and to support the 

implementation of the new Health Insurance Marketplaces. These authorities are also being lIsed 

to support other important public health priorities. improve the Medicare appeals process, and 

make improvements to HHS's financial management systems. 

Nonrecurring Expenses Fund 

The NEF was established by Section 223 of Division G of the Consolidated Appropriations Act 

of2008 (42 U.S.C. 3514a; P.L. 110-161). This Act provides HHS with the authority to transfer 

unobligated. expired discretionary funds into a no-year NEF account to spend on specific 

purposes as authorized by Congress. Monies from the NEF can be used for purposes including 

capital acquisitions necessary for the operation of the Department, including information 

technology infrastructure and facility infrastructure. Consistent with the requirements of the law. 

HIlS has notitied the Appropriations Committees in the House and Senate of its plans to obligate 

up to $600 million from the NEF at this time. The notification includes a plan for CMS to 

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receive $200 million to assist with implementing the Marketplaces and $250 million to carry out 

other CMS activities. 

Prevention and Public Health Fund 

The PPHF is an annual account that received an initial appropriation of$1 billion for FY 2013. 

which was reduced to $949 million after the sequester. [n FY 2013. funds were allocated to 

HHS operating divisions. including the Administration for Community Living, the Agency fix 

Healthcare Research and Quality, the CDC. the Health Resources and Services Administration. 

the Substance Abuse and Mental Health Services Administration. and CMS. 

The PPHF was established by Section 4002 of the Affordahle Care Act and may be used to 

support prevcntion and public health activities. including activities related to implementing the 

Marketplaces created by the Affordable Care Act. The PPHF may be used for both programs 

authorized by the Public Health Service Act. and prevention. well ness. and public health 

activities. Assisting Americans in gaining affordable health care aligns with the purpose and 

authority of the PPHF which is to support prevention. wellness. and public health. The 

implementation of the Marketplaces is a top health care priority for the Department and the 

nation. New coverage options available in the Marketplaces will increase access to preventive 

care and improve health outcomes for millions of individuals who will be able to enroll in 

affordable private health plans. Ensuring Americans have access to affordable, quality care will 

help tlJrther the Department's objective of improving public health. 

Secretary's Transfer Authoritv 

Section 206 of Division F-titled "Departments of Labor. Health and Human Services. and 

Education. and Related Agencies Appropriations Act. 2012"-ofthe Consolidated 

Appropriations Act. 2012 (P.L. 112-74), as continued under the Consolidated and Further 

Continuing Appropriations Act. 2013, authorizes the Secretary of HHS to transfer I percent of 

any discretionary funds which are appropriated for the current fiscal year for HHS in the 

Departments of Labor. HHS. and Education, and Related Agencies Appropriations Act between 

appropriations within HHS. Section 206 further specifies that no appropriation can be increased 

by more than 3 percent and requires that HHS notify the Committees on Appropriations of the 

House of Representatives and the Senate at least 15 days in advance of any transfer. Consistent 

with the requirements orthe law, HHS has notiflcd the Appropriations Committees in the House 

and Senate of its plans to transfer $114 million under this authority to CMS to implement the 

:Vlarketplaces. 

5. Would the Department share a written timeline of what we cau expect with respect to 

upcoming ACA implementation'? 

Answer: 

June 2013: 

Web Re-Launch & Call Center Launch 

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• In late June, CMS will re-Iaunch healthcare,gov, which will be the consumer destination 

for the Federally-facilitated and State Partnership Marketplaces and consumers will be able 

to access educational information. The site will add functionality over the summer before 

the October I, 2013 open enrollment. 

• At the same time. CMS' Federally-facilitated Marketplace consumer call center will begin 

taking calls from consumers, beginning with educational information and then assisting 

with enrollment and plan selection on October 1. 

Julv 2013: 

Final Qualified Health Plan (QHP) Evaluation Results Received & Data Finalized 

• This refers to the period in which CMS conducts the final QHP review and quality 

assessment in advance of the plan preview period for QHPs in the Federally-facilitated 

Marketplaces. 

• States send final QHP data and approval recommendations to CMS for State Partnership 

Marketplaces. 

State Department of Insnrance Approval of QHPs, State Partnership Review of QHPs 

Complete 

• This refers to the time during which State Departments oflnsurance (DOls) will review 

QHPs. 

August 2013 

Navigator! AgentlBroker Trainiug Complete 

• Consumer assisters, including Navigators. Non-Navigator Assistance Personnel, Certified 

Application Counselors. and Agents & Brokers will be available to help consumers with 

analyzing the coverage available in their state. selecting the coverage that is right for them, 

and completing eligibility applications. CMS will provide training to these consumer 

assisters in Federally-facilitated and State Partnership Marketplaces to ensure they are 

knowledgeable about the Marketplaces and the coverage that is available through them. 

CMS expects to have training modules available no later than August so that various types 

of ass is tel's will be prepared when enrollment begins in October. Trainings will be ongoing. 

QHP Plan Preview for Federally-facilitated & State Partnership Marketplaces 

• This refers to a process by which issuers will be able to view their QHP offerings loaded 

onto the Marketplace website the way consumers will see them. identify any inaccuracies, 

and request corrections to the information before the plan offerings are made public. 

September 2013 

IT Development & Integration Testing Complete 

• This refers to the date by which systems development will be complete for open 

enrollment. beginning on October 1. 2013. 

October 1, 2013 

Enrollment Begins 

• This refers to the first day (1 0!1I20 13) ofthe initial open enrollment period for the 

Marketplaces. 

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6. A number of news articles have noted higher premiums under the ACA. Would you 

provide your analysis on why this will or will not be the case? 

Answer: In an effort to slow health care spending and give all Americans more value for their 

health care dollars. the Affordable Care Act has brought an unprecedented level of scrutiny and 

transparency to health insurance rate increases by requiring insurance companies to justity rate 

increase. which has discouraged them from raising monthly premiums for unreasonable or 

lillnecessary costs. Insurers must provide clear information so consumers can understand their 

reasons for significant rate increases. We know this is making a difference. and that the 

Affordable Care Act is driving down health insurance premium costs in the private market by 

holding insurers accountable. 

A February 2013 report, Health Insurance Premium Increases in/he Individual Alarket since [he 

Passage o.llhe Affordable Care ACI.5 shows that since the rule on rate review was implemented, 

the number of requests for insurance premium increases of 10% or more plummeted from 75% 

10 an estimated 14% in 2013 as of the date of the report. The average premium increase for all 

rates in 2012 was 30% below what it was in 2010. 

Even when an insurer decides to increase rales. consumers are seeing 100ver rate increases than 

what the insurers had initially requested the states to approve. As of the date of the study, more 

than half of the rate requests for 10% or more ultimately resulted in customers receiving either a 

lower rate increase than requested or no hike at all. 

Furthermore, the rate review program works in conjunction ,,·/ith the 80/20 rule. which generally 

requires insurance companies to spend at least 80% (85% in the large group market) of 

premiums on health care. rather than administrative costs (such as executive salaries and 

marketing) and profits: otherwise. insurance companies must provide rebates to their customers. 

Insurers that did not meet the 80/20 rule have already provided $1.1 billion in rebates that 

benefited nearly 13 million Americans, at an average of $151 per family. 

Insurance benefits and costs also will become easier to understand for millions of Amerieans and 

small businesses starting on October 1. 20]3, when they will have the opportunity to shop in a 

Health Insurance Marketplace in their state. Consumers will be able to find information to make 

apples-to-apples comparisons of health plans by quality and price and buy the one that best fits 

their needs and budget. 

Delivering smarter health care includes holding insurers accountable. and that is helping to hold 

down costs. In the past three years. we've seen the slowest growth in overall health care 

spending since the govemment started keeping records more than 50 years ago. The new 

Marketplaces will increase competition between issuers in the individual market. Whether 

individuals are uninsured, or just want to explore new options. the Marketplace will provide 

more choice and control over health insurance options. CBO projects that lower administrative 

costs. greater economies of scale. and increased competition will decrease premiums 7 percent to 

10 percent in the non-group market. 

5 http:.'.aspe.hhs.gov'health'reports 120 13,'rateincreaseindvmkt irb.cfm 

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The Honorable Phil Gingrey 

1. During the hearing, Dr. Gingrey asked about your comments you made in March 

during a speech in Philadclphia. During that speech, you stated that" ... some men are 

going to see some higher costs. It's sort of a one to one shift ... some of the older 

customers may see a slight decline, and some of the younger ones are going to see a 

slight increase. These folks will be moving into a really fully insured product for the 

first times, so there may be a higher cost associated with getting into that market." You 

did not address his question about whether you think it is fair that young people will 

pay higher insurance rates because of this law. Has your department created 

contingency plans in the event that young people choose to pay the penalty instead of 

purchasing the insurance that they cannot afford? 

Answer: The individual and small group markets-the markets that much of the Affordable 

Care Act is designed to improve in particular-are broken. People are currently locked out of 

these markets because of their pre-existing conditions. or if they are able to buy insurance. they 

may find out their coverage will not extend to the care they need when they get sick. Young 

women who currently pay for their own insurance plan may discover that. simply on account of 

their gender. they are sometimes charged 50 percent more than young men are for the same plan. 

This fall. people are going to be able to buy comprehensive insurance without discrimination 

based on gender or pre-existing conditions. Also. low- and middle-income people may qualify 

for premium tax credits to help them buy insurance. 

Starting in2014. people in the individual and small group market will be able to choose new 

health plans based on the actuarial value they think fits their needs and their budget. Actuarial 

value means the percentage paid by a health plan of the total allowed costs of benefits. For 

example. if a plan has an actuarial value of 70 percent, the average consumer would be 

responsible for 30 percent of the costs of the essential health benefits the plan covers. Plans will 

range from 60 to 90 percent of actuarial value. 

Additionally, the Marketplace will increase competition between issuers on the individual 

market. CBO projects that lower administrative costs. greater economies of scale. and increased 

competition will decrease premiums 7 percent to 10 percent in the non-group market. 

Also, young adults and certain other people for whom coverage would otherwise be unaffordable 

may enroll in catastrophic plans. which have lower premiums. protect against high out-of-pocket 

costs. and cover recommended preventive services without cost sharing. Young people under the 

age of26 are also generally allowed to stay on their parents' insurance. helping make insurance 

more affordable for that group. 

There are also many provisions in the law to slow health care cost growth and create competition 

in the insurance marketplace. For example. the reinsurance and risk adjustment programs will 

help stabilize premiums. 

Our outreach efforts will help ensure that young people across the country learn about the 

benefits of obtaining health coverage through the Marketplaces. We hope to reach this 

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population through both traditional and social media campaigns that highlight the importance of 

health insurance. Consumers can sign up for updates about the marketplace through a mailing list 

on HcalthCare.gov.6 by "liking" the Health Insurance Marketplace on Facebook/ or by 

following @MarketplaceGov on TwitterS. On HealthCare.gov9 and on the HealthCare.gov 

YouTube channel 10 there are several short videos explaining how shopping for qualified health 

plans in the marketplace will work. 

The Honorable Bill Cassidy 

1. Dr. Cassidy asked if you could accept a 2 percent reduction in your HHS request. Due to 

time constraints you could not elaborate on your answer that you would not be able to 

accept a 2 percent reductiou. Please explain why you could not accept a 2 percent 

reduction in your HHS request. 

Answer: My FY 2014 request includes investments needed to support the middle class, grow 

the economy, and create jobs. A two percent cut to this request-a reduction of$1.6 billion--

would limit the Department's ability to protect the nation's public health and national security, 

focus on responsible stewardship of taxpayer dollars. promote science and innovation, protect 

vulnerable populations. create opportunity and give kids the chance to succeed. and improve 

health care and expand coverage. Further, a two percent cut would result in fewer resources for 

proven program integrity initiatives that reduce the deficit in the long term and ensure that the 

programs millions of American rely on will be there for generations to come. 

6 https:!!signllp_healthcare.gov!?x=135&y~.17 

7 hnps:!!www.facebook.comIHealthlnsuranceiv1arketplace 

8 https;!ltwitter.com/MarketplaceGov 

q http://wv.w.healthcare.govlmarketplacelindex.html 

iO http://v,ww_yolltllbe.com/liser/HealthCareGov 

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