U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

64–441—PDF 2009

S. HRG. 111–887 

NOMINATION OF KATHLEEN G. SEBELIUS 

HEARING 

BEFORE THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

ON THE

NOMINATION OF 

KATHLEEN G. SEBELIUS, TO BE SECRETARY OF 

HEALTH AND HUMAN SERVICES 

APRIL 2, 2009 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

MAX BAUCUS, Montana, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

KENT CONRAD, North Dakota 

JEFF BINGAMAN, New Mexico 

JOHN F. KERRY, Massachusetts 

BLANCHE L. LINCOLN, Arkansas 

RON WYDEN, Oregon 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

CHUCK GRASSLEY, Iowa 

ORRIN G. HATCH, Utah 

OLYMPIA J. SNOWE, Maine 

JON KYL, Arizona 

JIM BUNNING, Kentucky 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

JOHN ENSIGN, Nevada 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

RUSSELL SULLIVAN, Staff Director 

KOLAN DAVIS, Republican Staff Director and Chief Counsel 

(II) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Baucus, Hon. Max, a U.S. Senator from Montana, chairman, Committee 

on Finance ............................................................................................................ 1 

Grassley, Hon. Chuck, a U.S. Senator from Iowa ................................................. 3 

Roberts, Hon. Pat, a U.S. Senator from Kansas ................................................... 5 

WITNESS 

Dole, Hon. Robert, a former U.S. Senator from Kansas ....................................... 7 

ADMINISTRATION NOMINEE 

Sebelius, Hon. Kathleen G., nominated to be Secretary, Department of Health 

and Human Services, Washington, DC .............................................................. 9 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Baucus, Hon. Max: 

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

Dole, Hon. Robert: 

Testimony .......................................................................................................... 7 

Prepared statement .......................................................................................... 35 

Grassley, Hon. Chuck: 

Opening statement ........................................................................................... 3 

Letter from physicians and scientists of the Food and Drug Administration to Senator Grassley, dated April 2, 2009 ............................................ 38 

Letter from physicians and scientists of the Food and Drug Administration to President Obama, dated April 2, 2009 ............................................ 39 

Roberts, Hon. Pat: 

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

Prepared statement .......................................................................................... 45 

Prepared statement of Hon. Nancy Kassebaum Baker ................................. 46 

Rockefeller, Hon. John D., IV: 

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

Sebelius, Hon. Kathleen G.: 

Testimony .......................................................................................................... 9 

Prepared statement .......................................................................................... 49 

Biographical information ................................................................................. 56 

Responses to questions for the record from committee members ................. 87 

Responses to questions for the record from Senator Byron L. Dorgan ........ 212 

COMMUNICATION

Medicaid Health Plans of America ......................................................................... 215 

(III) 

(1) 

NOMINATION OF KATHLEEN G. SEBELIUS, 

TO BE SECRETARY, U.S. DEPARTMENT 

OF HEALTH AND HUMAN SERVICES 

THURSDAY, APRIL 2, 2009 

U.S. SENATE, 

COMMITTEE ON FINANCE, 

Washington, DC. 

The hearing was convened, pursuant to notice, at 10:09 a.m., in 

room SD–215, Dirksen Senate Office Building, Hon. Max Baucus 

(chairman of the committee) presiding. 

Present: Senators Bingaman, Lincoln, Wyden, Schumer, Stabenow, Cantwell, Nelson, Carper, Grassley, Hatch, Snowe, Crapo, 

Roberts, Ensign, and Enzi. 

Also present: Democratic Staff: Bill Dauster, Deputy Staff Director and General Counsel; Liz Fowler, Senior Counsel to the Chairman and Chief Health Counsel; Ayesha Khana, International 

Trade Counsel; Diedra Henry-Spires, Professional Staff; and Mary 

Baker, Detailee. Republican Staff: Emilia DiSanto, Special Counsel 

and Chief Investigator; Mark Hayes, Health Policy Director and 

Chief Health Counsel; Michael Park, Health Policy Counsel; Andrew McKechnie, Health Policy Advisor; and Nick Wyatt, Tax Staff 

Assistant. 

OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR 

FROM MONTANA, CHAIRMAN, COMMITTEE ON FINANCE 

The CHAIRMAN. The hearing will come to order. 

In his 1961 book, ‘‘The Making of the President,’’ Theodore White 

wrote: ‘‘Whether [one] is burdened by power or enjoys power; 

whether [one] is trapped by responsibility or made free by it . . . 

this is the essence of leadership.’’ 

The Secretary of Health and Human Services has a great deal 

of power, and the Secretary of HHS has a great deal of responsibility. Governor Sebelius, you have before you a great opportunity 

for leadership. 

HHS oversees Medicare. Medicare provides health coverage to 

more than 45 million Americans. It is at the heart of our compact 

with seniors and individuals with disabilities. 

HHS oversees Medicaid. Medicaid provides the health safety net 

for more than 55 million low-income beneficiaries. HHS oversees 

the recently authorized Children’s Health Insurance Program. HHS 

oversees the Child Welfare system, which serves the Nation’s most 

vulnerable children, including those in foster care. 

2 

HHS oversees TANF. TANF helps the neediest families among 

us. HHS ensures that our drugs and medical devices are safe and 

effective, that medical innovation continues to thrive, and their 

help with promotion of disease prevention remains at the center of 

our efforts to improve public health. 

If all that were not enough, Governor Sebelius, you will undoubtedly also be involved in the upcoming effort to reform our ailing 

health care system. It is high time that we answer the call to reform our health care system. America spends more on health care 

than any other country. We spend nearly twice as much as the 

next highest spending country. 

By almost any measure, America’s health care system does not 

measure up in terms of quality or outcomes. A study published last 

year said the United States’ health system scores 65 out of a possible 100 points on 37 indicators of health outcomes, quality, access, equity, and efficiency. We rank last out of 19 countries in the 

number of deaths that could have been prevented with medical 

intervention. Five years ago we were 15th, and now we are last. 

As Jack Wennberg of Dartmouth and others have demonstrated, 

health spending in patients vacillates very widely and irrationally 

from one geographic area to another. Our failure to reduce this vulnerability in the health care quality and outcomes is causing us to 

fall further and further behind other industrialized countries. 

Meanwhile, health care costs are growing dramatically. In the 

last 8 years, average wages have increased only 20 percent, but the 

average cost of employer-sponsored health coverage has doubled. 

Health insurance premiums have tripled. Health spending has 

grown from 12 percent of the economy to 16 percent just in the last 

8 years. 

The cost of health care makes it harder for American companies 

to compete in the world, and the cost of health care makes it harder for small businesses to survive. To top it all off, 46 million Americans do not have health coverage, and another 23 million are 

under-insured. 

Given all this, it is no wonder that 9 out of 10 people believe that 

the health system needs to be completely rebuilt or needs fundamental change. The opportunity to bring on that fundamental 

change is now, and we must take advantage of that opportunity to 

enact it into law this year. 

The time for incremental change has passed. It is increasingly 

difficult to fix the system one step at a time. We cannot add 46 million uninsured to a broken system. We also cannot bend the growth 

curve, the cost curve of health spending without covering the uninsured. This will be hard. We will have some rough patches ahead, 

but we also have a duty to try, and I am confident that we can succeed. 

Our efforts to address health care costs, quality, and coverage for 

all Americans will necessarily encompass improvements in Medicare. Medicare’s payment systems reward the provisions of more 

care, not better care. We must address that. 

Reform will also affect Medicaid. Medicaid plays a substantial 

role in American health care spending. Medicaid pays for $1 out of 

every $6 in health care spending, $1 of every $6. Medicaid serves 

3 

more beneficiaries than Medicare. Medicaid is the country’s health 

safety net. 

Strengthening this safety net should be a high priority. Expanding Medicaid will fulfill its original intent as a viable source of 

health care to the country’s most vulnerable populations. The eligibility determination process should be streamlined. We should ensure that all who are eligible have a simple and understandable 

path to get needed services. Beyond health care reform, Congress 

must reauthorize the TANF program next year, and more remains 

to be done to improve our child welfare program. 

Governor Sebelius, one of the places most in need of your leadership is Libby, MT. As you know, Libby has suffered like few other 

towns, suffered more than any town that I am aware of. Over 200 

people in Libby—and it is a very small town—have died because 

of asbestos contamination. 

As Secretary of HHS, you will have the opportunity to help the 

people of Libby get the health care they need and deserve. Libby 

is counting on your leadership, and I hope that you will work with 

me to ensure that there is justice for Libby. 

As you know, there is a lot of work to be done. If we continue 

to work hard, if we continue to work together, I am confident that 

we can reach these goals. 

Governor Sebelius, I want to thank you for your service to our 

country. You come with a great reputation as a smart, pragmatic, 

and thoughtful leader. You are known as a dedicated public servant who can overcome partisanship and bring together personalities from all perspectives. Along with Senator Grassley and my 

colleagues on the committee, I look forward to working with you. 

And so, Governor, here is hoping that you will not be burdened 

by your new powers, but will enjoy them. Here is hoping that you 

will not be trapped by your HHS responsibilities, but you would be 

made free by them. As Secretary of HHS, here is hoping that you 

will make the most of your opportunity for leadership. 

Senator Grassley? 

OPENING STATEMENT OF HON. CHUCK GRASSLEY, 

A U.S. SENATOR FROM IOWA 

Senator GRASSLEY. Thank you, Senator Baucus. And welcome, 

Governor Sebelius, and particularly welcome because of your willingness to serve your country. 

If confirmed, you will lead over 64,000 employees, with an annual budget of about $700 billion. Your Department serves many 

vital functions to promote the health and well-being of Americans. 

The Centers for Medicare and Medicaid Services provide health 

care to about 100 million Americans through Medicare, Medicaid, 

and the Children’s Health Insurance Program. Americans also rely 

on the Food and Drug Administration to ensure the safety of food, 

drugs, and devices. 

The National Institutes of Health, under your direction, are the 

principal driver of biomedical research. In addition to being at the 

helm of the Department, you will also be a policy leader when it 

comes to health issues. 

As a Cabinet member, you will have a significant role in shaping 

administration policy. It is good that you will be bringing your exVerDate Nov 24 2008 16:17 Mar 04, 2011 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 R:\DOCS\64441.000 TIMD
4 

tensive public service, and more important, your Midwest sensibility and common sense to the job. These will serve you well in 

difficult challenges that lie ahead of you in a city where sometimes 

common sense does not prevail. 

You come at a time when we face many significant challenges in 

health care. The first is health care reform. We all know why we 

need health care reform now, not later. Skyrocketing health care 

costs affect everyone: governments, businesses, and all households. 

Despite all this spending, we still have 47 million people uninsured. Despite all this spending, it is clear that we are not always 

getting our money’s worth when it comes to health care quality. 

Governor Sebelius, these are indeed serious challenges that we all 

face. 

But you also come at a time when there is a strong desire and 

a strong commitment to work together on reform. Doing nothing is 

not an option. But, of course, the devil is always in the details. If 

we work together, we can reform our health care system to solve 

the problems of cost, quality, and access, and we can do it without 

some proposals that have been circulating lately. 

First, health care reform should not be legislated through reconciliation. Everyone agrees that health care reform, because it 

deals with 16 percent of our economy, is not just an issue of health 

care. You are restructuring 16 percent of our economy. It must be 

done on a bipartisan basis. Reconciliation is, instead, a partisan exercise that is not an appropriate vehicle for real health care reform. 

The next important issue is the issue of a public plan option. We 

can reform our health care system to achieve our goals without 

having a public plan option that is run by the government. We do 

not need a public plan where the government sets the rates that 

it pays doctors and hospitals and decides what treatment it would 

cover. 

Instead, we need a system where people who like the coverage 

they have today can keep it, just as the President said he would 

do, and where stronger rules on the health care market mean that 

health insurers have to cover people with preexisting medical conditions and stop charging higher premiums for sick people. 

A new government-run health insurance plan would result in rationing of our health care to control costs, and that would take us 

down the road toward a government-run system, I think, that people rejected 18 years ago when the issue came up. These are a few 

examples of tough issues—not the only ones, of course, but we need 

to roll up our sleeves and work in a bipartisan way to find these 

solutions. 

On some of the issues, we need transparency in health care. All 

the stakeholders need to have adequate information to make 

choices in order for a health care system to work. This information 

includes price and quality data for patients and providers. It also 

includes knowing if the manufacturer of a drug or medical device 

your doctor prescribes for you—whether or not those people have 

been funneling money to your doctor that might influence a decision. 

So, I could mention a lot of other things, but understand, I look 

forward to hearing your thoughts on the role of transparency. Combatting waste, fraud, and abuse in any agency of government, parVerDate Nov 24 2008 16:17 Mar 04, 2011 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 R:\DOCS\64441.000 TIMD
5 

ticularly in health care, is a priority for me. We have much work 

to do in this regard. I would like to know if curbing waste, fraud, 

and abuse is a priority for you, and particularly the experiences 

you have had as Governor in this area. 

Another area that Senator Baucus, I, and other members of the 

committee have worked tirelessly on is the problems of the delivery 

of care in rural America. Since you come from a largely rural State, 

I am sure that you share our commitments to ensuring that we 

have a viable and high-quality health care system in rural America. 

But that is something that maybe this town does not understand. 

You, coming from where you do, bring a lot of education to people 

in this town who do not understand what rural America is all 

about and the difficulty of delivering health care in those particular 

areas. Now, these are just a few of the issues that I hope that we 

will be facing together. 

Mr. Chairman, I have a request to put two letters into the 

record, and I want to explain these to the Governor. These letters 

are from a group of nine scientists at the FDA. 

The CHAIRMAN. Without objection. 

[The letters appear in the appendix on p. 38.] 

Senator GRASSLEY. They are writing, for a second time, to President Obama today regarding their grave concerns about the FDA. 

Governor Sebelius, I want to be sure that you are aware of these 

concerns from whistle-blowers inside the agency. 

I also want to note that I am providing copies for the record that 

do not identify the whistle-blowers’ names. They are afraid of retaliation, particularly in light of a former Acting FDA Commissioner’s 

recent statements and the President’s recent signing statement 

that seems to limit whistle-blower protections. 

Also, as has been reported already, you have addressed some tax 

irregularities, before we began our review in the committee of your 

tax returns. I take these tax matters very seriously, and I am eager 

for you to address those matters today so that they may be taken 

into consideration as your nomination moves forward. 

With that, I thank you once again for your service to your State, 

as well as now, potentially, to the country as a whole. 

The CHAIRMAN. Thank you, Senator. Thank you very much for 

your statement. 

I would now like to welcome our witness. Today we will hear 

from Governor Kathleen Sebelius. Since Governor Sebelius hails 

from the Sunflower State, I would like to introduce and to recognize another distinguished resident of the Sunflower State who 

happens to be a distinguished member of this panel, the senior 

Senator from the Sunflower State, someone I work with very closely, and who provides valuable service to his State and to the Nation. 

Senator Roberts? 

OPENING STATEMENT OF HON. PAT ROBERTS, 

A U.S. SENATOR FROM KANSAS 

Senator ROBERTS. Well, thank you, Mr. Chairman. 

I would like to associate myself with the remarks of Senator 

Grassley in reference to the need to protect the rural health care 

6 

delivery system. Our Governor certainly knows that and is wellacquainted with that issue. I would just say for the record that I 

think both the Governor and I stand opposed to fraud, waste, and 

abuse. 

Basically, today is a special day for the State of Kansas, Mr. 

Chairman. We have with us today one of Kansas’s favorite and 

most-beloved public servants in support of our Governor, Kathleen 

Sebelius, Senator Bob Dole. Bob, it is an honor to have you here. 

As everybody knows, you were a former chairman of this committee, and did an outstanding job, and also the leader of the Senate. I would add, in the free world if I might. That might be a little 

bit expansive. 

But Kansans are always mindful of the great legacy that you 

forged for us in this committee. The chairman sent me a letter and 

indicated, which I did not know, that we had five Kansans on this 

committee in the history of the committee, and of course you lead 

that posse in regards to leadership and effectiveness. So I continually strive to live up to your years of service to our State. 

Whenever I have an audience like this, and my colleagues’ attention, I hope, I also want to mention that a lot of victory flights are 

flown into Washington. They are flown in to visit the World War 

II Memorial, and also the Iwo Jima Memorial, I might add. It is 

not often that you have a Senator, either sitting or retired, who has 

a monument to him, but I would suggest that the World War II 

Memorial is about the best monument to Bob Dole that I know of, 

because without him it would not have happened. 

I have a letter here from Senator Nancy Kassebaum Baker, who 

was an outstanding Senator and extremely popular with our people, for good reason, and I would like to submit that letter and my 

statement for the record at this time. 

The CHAIRMAN. Without objection. 

[The letter appears in the appendix on p. 46.] 

Senator ROBERTS. Governor Sebelius, welcome. It is a real opportunity for Kansas to be represented as a member of the President’s 

Cabinet. Governor Sebelius and I have a special relationship, in 

that her father-in-law was my predecessor in the House of Representatives, former Congressman Keith Sebelius. I had the privilege of serving as his administrative assistant during his entire 

congressional career. He was a great Congressman, a great man, 

and a great friend. 

I have known Kathleen and her husband Gary throughout the 

years. We have enjoyed a good relationship. The Governor said in 

a hearing before the HELP Committee on Tuesday that, while we 

do not agree on some issues, we have always been able to work together. I look forward to building on that relationship as we work 

towards improving our Nation’s health care system and all of the 

challenges that both the chairman and ranking member have certainly outlined. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you very much, Senator. 

[The prepared statement of Senator Roberts appears in the appendix.] 

The CHAIRMAN. I might, just for the interest of the Senators from 

Kansas, and also Governor Sebelius, note that the names of the 

7 

five Kansans who served in the Finance Committee in addition to 

obviously Senator Roberts and Senator Dole, are Charles Curtis— 

he was once Vice President—who served in this committee, and 

then before him was Frank Carlson, who served in the 83rd to the 

90th Congress, and before Frank Carlson—— 

Senator ROBERTS. Mr. Chairman, I was the administrative assistant to Senator Frank Carlson during those days. 

The CHAIRMAN. No wonder he did so well. 

Senator ROBERTS. I am sort of a piece of old furniture around 

here, it looks like. [Laughter.] 

The CHAIRMAN. I doubt anybody here was administrative assistant to the first Senator who served. 

Senator ROBERTS. No. I missed that one. 

The CHAIRMAN. That was Arthur Capper from the Sunflower 

State. 

Senator ROBERTS. No. But I knew Arthur Capper. [Laughter.] 

The CHAIRMAN. All right. 

Senator Dole? 

STATEMENT OF HON. ROBERT DOLE, 

A FORMER U.S. SENATOR FROM KANSAS 

Senator DOLE. Well, I would ask that my entire statement be 

made a part of the record. It is not that long. 

[The prepared statement of Senator Dole appears in the appendix.] 

Senator DOLE. I am very honored to be here. I love this committee. I thought we did a lot of good things here in a bipartisan 

way. I know the numbers have changed, so the Democrats do not 

really need to worry much about bipartisanship. But as I look back 

on my experience, the things that really mattered, the things that 

really stuck with the American people and had more credibility, 

were things that were done in a bipartisan manner—not two, 

three, or four, but a dozen or so on either side. 

If any committee can do it, it is the Finance Committee. There 

are a lot of good pieces of legislation floating around, right? The 

one from the gentlemen from Oregon and Utah. They have a great 

program. They have been out having hearings. I am working with 

Senator Mitchell, Senator Daschle, and Senator Baker as four 

former leaders, and we will have recommendations to make regarding health care. We think some may have validity, some may be 

discarded, and some may complement things that others are doing 

in the field. 

But today I have this great honor to be here with my friend and 

fellow Kansan. You get a kind of a 2-for here, you get Ohio and 

Kansas. I served in the House with her father, even voted with him 

once or twice. Also, Keith Sebelius, her father-in-law, followed me 

when I came to the Senate; he came to the House. 

So I have known the family, and I know them to be just outstanding Americans. I know Kathleen believes—we throw this 

word around so much it worries me a little. Maybe bipartisanship 

is not the right word. But just getting along, understanding that 

we have to do something. It does not make any difference whose 

name is on it. 

8 

Just to bring in a little of that, when Hubert Humphrey died, I 

went to Senator Mondale and said, would you object if I went 

around with a petition to rename the HHS building the Hubert 

Humphrey Building? Before the end of the day, I had 99 signatures, Democrats and Republicans. 

So when you walk into the HHS building, the Hubert Humphrey 

Building, it was initiated in a bipartisan way, and I think that is 

going to be a good omen for Governor Sebelius. As the chairman 

said, she has a mountainous load to even catalog, let alone understand. I cannot think of any committee that is going to be more important than this committee, and any Cabinet official who is going 

to have a heavier load to carry than the Governor. 

So, we think the President has made a very wise choice, and I 

think perhaps we know the crucial role this committee is going to 

play. We had a good hearing Tuesday with the HELP Committee— 

good, sound questions and answers and responses. I have been 

around here for a while, and I think that, if we cannot put together 

a comprehensive health care plan this year, we are going to miss 

a big opportunity because next year you are back in an election 

cycle. Then when you get into the next presidential cycle, it always 

starts 2 years out. So we are looking 4 years down the road if we 

cannot find the courage and the willingness to compromise. 

Everybody always cites in our party—and I thought I was pretty 

conservative—Ronald Reagan as the icon of conservatism. He used 

to tell me, as the Republican Leader, if you can get me 70 percent, 

take it. I will get the rest next year, or sometime. So he was not 

one of those who demanded 100 percent. If we are all going to demand 100 percent on your position or my position, we are not going 

to get anywhere. We might as well lock it up and go home and do 

something else, have some fun. But I think this is the year. I think 

the American people are ready for the struggle, and I think Democrats and Republicans are, so we hope that we can be of help. 

Governor Sebelius understands bipartisanship. She works with a 

heavily Republican legislature. They have gotten a lot of good 

things done. There are some things they did not agree on, but a 

lot of good things got done because of her willingness to reach 

across and to compromise. I think bipartisanship in Kansas, or 

here, will stand the test of time. That is another hallmark of getting together. 

I went back and looked through all the bills that I thought were 

important that I was involved in, and every one that really made 

a big difference in people’s lives had broad support. I think that is 

one way we can measure it. 

We had people like Senator McGovern, Bob Dole, and Hubert 

Humphrey working together. Nobody thought that would ever happen. I even worked with Orrin Hatch, as right-wing as he is. 

Senator HATCH. There you go being reasonable again, Bob. 

[Laughter.] 

Senator DOLE. But anyway, we had a great group. I think the 

thing to remember is that Kathleen has had the experience. As a 

former insurance commissioner, she knows a lot about health care. 

You learn a lot about it being Governor and in the State legislature, where she was. That is what we need, somebody with the 

9 

skill, somebody with the experience, and somebody with the courage. 

If we have some namby-pamby leader at HHS, we are not getting 

anywhere. Kathleen is tough in the right sense of the word, and 

she is never going to stop trying. It is going to be some pretty 

heavy climbing and heavy lifting when we get down to the nittygritty of this legislation. But if I know anything about the Governor, she is not going to give up. She is going to provide the leadership and get us through—I keep saying ‘‘us,’’ to get you 

through—some of the very tough times you are going to have. 

So, I would just conclude by saying that we are from different 

parties, we have differences. Some of them are controversial, but 

I agree with President Obama, who selected Governor Sebelius to 

take on this job. He determined one thing. He determined that she 

was well-qualified and that she had the experience, and that she 

had the courage, and that she could work with people to get things 

done. That is why I think he made a great choice. 

We do not get too many Cabinet officers out our way. Dan Glickman, I think, was the last, so we will get free movies now. [Laughter.] 

I think he was about the last Cabinet officer from Kansas. 

So the $64,000 question is: can we forge a bipartisan proposal 

that is accessible, available, and affordable? We can, with steady 

and determined leadership. Governor Sebelius is ready to lead us 

in that direction. 

I also have the letter from Senator Kassebaum, but since Pat has 

put it in the record, I will ask that it be deleted from my statement. 

The CHAIRMAN. Without objection. 

Senator DOLE. Thank you. 

The CHAIRMAN. Thank you, Senator. It is always a joy seeing you 

and listening to you. You add so much perspective and zest and enthusiasm to public service. I thank you, too, for that gracious effort 

to name the HHS building the Hubert Humphrey Building in the 

way that you did it. It seems to me that, if everybody who walks 

into that building now, including our new HHS Secretary, just remembers the exuberance, the vitality, the energy, and the dedication of Hubert Humphrey. 

Senator DOLE. That is right. 

The CHAIRMAN. Just, every day you walk in, it means there is 

a much better chance we are all going to get our jobs done in a way 

that helps our public, helps the people in the Nation. He had such 

an irrepressible, fantastic spirit and energy, Hubert Humphrey. So, 

thank you very much, Senator, for all that you have done. It is a 

privilege seeing you again. 

Governor Sebelius, we would love to hear from you now. 

STATEMENT OF HON. KATHLEEN G. SEBELIUS, NOMINATED 

TO BE SECRETARY, DEPARTMENT OF HEALTH AND HUMAN 

SERVICES, WASHINGTON, DC 

Governor SEBELIUS. Well, thank you, Mr. Chairman. 

Chairman Baucus, Senator Grassley, members of the committee, 

thank you for inviting me here today to discuss my nomination as 

Secretary of the Department of Health and Human Services. 

10 

I do want to start by mentioning two people who are not here 

today, first, Senator Nancy Kassebaum Baker, a good friend, a 

former colleague of many of yours who was hoping to be here. Senator Baker was one of the Kansans who, over the weekend, lost 

power. She was one of the 20,000 people stuck in an ice storm, so 

she decided home recovery might come as a priority, but sends her 

greetings to her former colleagues. I am pleased to have her support and her help. 

I also want to recognize that my husband, Gary Sebelius, whom 

Senator Roberts helped to raise along the way and covered up his 

periodic misdeeds as a college student, also unfortunately could not 

be here. Gary is a Federal Magistrate Judge, and on Tuesdays and 

Thursdays has a busy criminal docket. So, I bring greetings from 

him, but unfortunately he is not here. 

It makes it even more important then to have my good friends 

and colleagues, Senator Roberts and Senator Dole, with me. Not 

only have I known them both for years and worked with them, but 

more importantly, they know my family, and so they are here as 

family friends as well. 

I am so honored that President Obama has asked me to fill this 

critical role at such an important time. I am also honored to have 

the opportunity to testify before this committee, which has a long 

record of meaningful involvement in the debate over health care in 

America, and is uniquely positioned to help advance the cause of 

comprehensive health reform. 

In particular, I want to recognize the tireless work of Chairman 

Baucus and Senator Grassley in recent years to lay the groundwork for health reform, from your Health Reform Summit last 

June to the series of hearings you convened in the 110th Congress 

to examine the components of health reform. 

Because the Finance Committee’s jurisdiction encompasses Medicare, Medicaid, and the Children’s Health Insurance Program, the 

government’s largest and most important health care programs, as 

well as the tax code, this committee controls many of the key levers 

that will help us make health care more affordable and more accessible. If confirmed, I look forward to partnering with you to build 

on your experience as we work to enact meaningful health reform 

this year. 

The Department of Health and Human Services strives for a simple goal: protecting our Nation’s health and providing essential 

human services. Among its many initiatives, the Department supports genomics research to find cures for debilitating diseases that 

afflict millions of Americans and challenge their families; provides 

children with health care, early education, and the child care they 

need to enter school ready to learn; and protects the health and 

well-being of seniors through Medicare. 

The Department is also charged with sustaining our public 

health system, promoting safe food, clean water and sanitation, 

and healthy lifestyles. Working in concert with scientific advances 

and medical breakthroughs in an ever-evolving understanding of 

the human condition, the Department’s efforts have made a difference. 

Yet here we are at the beginning of the 21st century, facing new 

and even more daunting challenges. Perhaps most importantly, we 

11 

face a health system that burdens families, business, and government budgets with skyrocketing costs. Action is not a choice, it is 

a necessity. I am excited to join the President in taking on these 

challenges, many of the same challenges I have addressed as Governor, as a former insurance commissioner, and as a State legislator. 

I am proud to have worked for more than 20 years to improve 

Kansan’s access to affordable, high-quality health care, to expand 

access to high-quality child care and early childhood education, to 

assist seniors with Medicare challenges, to work to expand the 

pipeline of health care providers, and to ensure access to vital 

health services in our most rural areas. 

I have also been a health care purchaser, directing the State Employees Benefit Program, as well as overseeing the operation of 

health services in our correctional institutions, Medicaid and CHIP 

programs, and coordinating with local and community partners on 

health agencies across Kansas. 

As insurance commissioner, I took the then-unprecedented step 

of blocking the sale of our Blue Cross/Blue Shield company to a 

health care holding company, Anthem of Indiana, because all the 

evidence suggested that the premiums for Kansans insured by Blue 

Cross would have increased too much. These efforts, and others, 

have yielded results. The uninsured rate is Kansas is lower than 

the national average. Our health statistics are improved, and Kansas has been ranked first for health care affordability for employers 

and received a 5-star rating for holding down health care costs. 

I hope you give me the opportunity to apply my experience as 

Governor and insurance commissioner to the challenges of advancing the health of the Nation. These challenges are significant. 

Health care costs are crushing families, businesses, and government budgets. Since 2000, health insurance premiums have almost 

doubled, as the chairman indicated earlier, and an additional 9 million Americans have become uninsured. 

We have by far the most expensive health system in the world. 

We spent 50 percent more per person than the next most costly nation. Americans spend more on health care than on housing or 

food. General Motors spends more on health care than on steel. 

High and rising health costs have certainly contributed to the 

current economic crisis and represent the greatest threat to our 

country’s long-term economic stability. Rapid projected growth in 

Medicare and Medicaid account for most of the long-term Federal 

fiscal deficit. At the State and local level, policymakers are forced 

to choose between health care and other priorities, like public safety and public education. 

American jobs are also at stake. Businesses are striving to maintain both coverage and competitiveness. Currently, there is no relief in sight. That is why I share the President’s conviction that, 

as he says, ‘‘Health care reform cannot wait, it must not wait, it 

will not wait another year. Inaction is not an option. The status 

quo is unacceptable and unsustainable.’’ 

Within days of taking office, the President signed into law the reauthorization of the Children’s Health Insurance Program, a hallmark of the bipartisanship and public/private partnerships that we 

envision for health reform. 

12 

Implementing this program in partnership with the States will 

be one of my highest priorities. President Obama also worked to 

enact and implement the American Recovery and Reinvestment 

Act. This legislation includes essential policies to prevent a surge 

in the number of uninsured Americans and makes positive investments now that will yield health and economic dividends later. 

Through health reform technology—a number of you have been 

leaders in that area—the Recovery Act lays the foundation for a 

21st-century system to reduce medical errors, lower health costs, 

and empower health consumers. It supports vital information by 

gathering information and investing over $1 billion in comparative 

effectiveness research to provide information on the relative 

strengths and weaknesses of alternative medical intervention to 

health providers and consumers. The Recovery Act also makes a 

historic investment in prevention. 

The President’s budget submitted in February continues the 

work begun in the Recovery Act. It dedicates $634 billion over the 

next 10 years to reforming the health care system. The proposals 

align payment incentives with quality, promote accountability and 

efficiency, and encourage shared responsibility. Still, the President 

recognizes that the reserve fund is not sufficient to fully fund comprehensive reform and is committed to working with Congress to 

find additional resources to devote to health care reform. 

We appreciate the steadfast leadership of the Senate Finance 

Committee to work to solve this great challenge for our Nation, and 

we hope to see action in the coming months. Should I be confirmed, 

health reform will be my mission, as it is the President’s, along 

with the tremendous responsibility of running this critical Department. 

I would like to take a moment to highlight a few of the opportunities and challenges currently facing the Department. CMS, the 

Centers for Medicare and Medicaid Services, which administers 

Medicare, Medicaid, and the Children’s Health Insurance Program, 

will have a vital role to play in promoting health care reform in its 

goals of affordability, accessibility, and quality. 

If confirmed, I want to work with you to ensure that all of those 

eligible for Medicare, Medicaid, and CHIP are enrolled and to 

strengthen those programs’ roles in protecting the Americans with 

the highest costs and the lowest incomes. 

As we address the challenges in our health system, we cannot 

lose sight of the families struggling with the daunting challenge of 

long-term care. For more than 40 years, the Administration on 

Aging has played a prominent role in promoting home- and community-based long-term care services, providing a broad array of support services for seniors and their family caregivers. This agency 

will be a critical partner in expanding our capacity to provide community long-term care services. 

The Administration for Children and Families plays a vital role 

in getting our children ready to learn and thrive in school, helping 

low-income working families struggling to make ends meet in this 

difficult economy, and meeting the basic needs of vulnerable populations, such as abused and neglected children, refugees, and individuals with disabilities. 

13 

If confirmed, I look forward to continuing the Department’s critical leadership in this area, and I will examine ways to improve our 

efforts through evidence-based approaches that make a difference 

for families and their children. 

Leading the Department of Health and Human Services and 

working with the President to reform the health system will not be 

easy. If it were, as President Obama has said, our problems would 

have been solved a century ago. But the status quo cannot be sustained and is unacceptable for both our economic prosperity and 

the health and wellness of the American people. 

Previous opponents of health reform are now demanding it, putting common interests and an affordable, quality system of care for 

all ahead of special interests. Policymakers like those of you here 

on the Finance Committee and across the halls of Congress are 

reaching across party and ideological lines to accomplish this urgent task. I hope I have the opportunity to join you, and I look forward to your questions. 

[The prepared statement of Governor Sebelius appears in the appendix.] 

The CHAIRMAN. Thank you, Governor, very, very much for that 

powerful statement. I have several questions I must ask, the same 

questions I ask all nominees, before we get to the substance. 

Governor SEBELIUS. Yes, sir. 

The CHAIRMAN. First, is there anything that you are aware of in 

your background that might present a conflict of interest with the 

duties of the office to which you have been nominated? 

Governor SEBELIUS. No, Senator. There were a couple of stocks 

owned in my husband’s portfolio which had been identified by the 

Ethics Officer, and we have committed to, if I am confirmed, divesting of those stocks. 

The CHAIRMAN. Do you know of any reason, personal or otherwise, that would in any way prevent you from fully and honorably 

discharging the responsibilities of the office to which you have been 

nominated? 

Governor SEBELIUS. No, sir. 

The CHAIRMAN. Do you agree, without reservation, to respond to 

any reasonable summons to appear and testify before any duly constituted committee of Congress, if you are confirmed? 

Governor SEBELIUS. I do, and I look forward to it. 

The CHAIRMAN. Good. 

Have you read the white paper that this committee has published? 

Governor SEBELIUS. I did. 

The CHAIRMAN. Could you talk to us about that? That is, do you 

generally agree with all the components in it or do you disagree 

with one or two? I noticed that, during the campaign, nowPresident Obama, for example, supported a mandate for children 

but did not go any farther during the campaign. He has been, I 

think, a bit silent on that subject since. As you know, in the white 

paper I called for an individual mandate. That is, I think all Americans have to have health insurance. 

There are lots of reasons why all Americans should have health 

insurance. One is to prevent cost-shifting—which now occurs between those who are uninsured to those who have health insurVerDate Nov 24 2008 16:17 Mar 04, 2011 Jkt 000000 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 R:\DOCS\64441.000 TIMD
14 

ance—and also to help make the market work by encouraging people to purchase coverage while they are still healthy—it is a big 

problem now because so many people are uninsured—and also to 

make prevention and wellness efforts more effective. It seems to 

me the more people who have health insurance, the more we can 

address prevention and wellness efforts. 

So my question to you is, will you work, and will the administration work with this committee as we try to find ways to get everyone covered with health insurance, including potentially an individual mandate? 

Governor SEBELIUS. Well, Mr. Chairman, first of all, I think the 

white paper that was authored by you and members of the committee is a wonderful road map to a health reform strategy. As you 

know, the President, on the campaign trail, outlined specifics of 

health strategy. Many of the elements are identical to those in the 

white paper and, as you suggested, some are a little different. 

I think the President is absolutely committed to not only a bipartisan strategy, but the notion that he did not write a health reform 

bill. He wanted to have a dialogue and engagement with Congress. 

He wanted to put the pieces together. As he has said repeatedly, 

every serious idea should be considered and vetted and put on the 

table. So there may be variations about how best to reach the goal 

most effectively, most cost-effectively, most efficiently, with the 

best health outcomes and insuring every American. I think he is 

open to all of those proposals. 

The CHAIRMAN. But do you personally agree or not that everybody should have health insurance in this country? 

Governor SEBELIUS. Absolutely. I absolutely agree, and I know 

the President is totally committed to that proposal that every 

American should have health insurance. 

The CHAIRMAN. And the more we can reasonably work quickly, 

we can reasonably achieve that goal, the better. 

Governor SEBELIUS. Well, no question about it. I think there 

have been those who suggest that, given the daunting challenges 

facing our economy, maybe we should defer the health care discussion to a later year. I am absolutely committed, as is the President, 

to moving forward this year. We feel that reforming our health system is an essential part of reforming the economy. 

The CHAIRMAN. Right. And clearly a necessary part of universal 

coverage would be health insurance market reform. 

Governor SEBELIUS. Absolutely. 

The CHAIRMAN. Especially in the individual market. It would 

also mean access, so that each American who currently does not 

have health insurance would have access. That means some way to 

get some financial support for those persons who are lower-income 

and just cannot pay for health insurance, but part of that also necessarily means health insurance market reform. Given your experience as insurance commissioner, could you please advise us on how 

we achieve health insurance market reform? 

Governor SEBELIUS. Well, Mr. Chairman, as you know, the current process often is a bit of a cherry-picking process with private 

insurers discouraging coverage in one of two ways, either overpricing coverage for Americans with preexisting conditions, which 

makes it impossible to afford, or in some cases the individual marVerDate Nov 24 2008 16:17 Mar 04, 2011 Jkt 000000 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 R:\DOCS\64441.000 TIMD
15 

ket just refusing to cover many Americans who do not have other 

alternatives for coverage. 

So I think the preexisting condition barriers are significant for 

those who have a health condition, and the cost barriers are often 

significant, of dividing people into very small groups and then rating on a health incident. If you are a small business owner and 

have someone in your business shop of four or five who is a cancer 

survivor or a heart attack victim, often your premiums may be 

priced in such a way that they are totally unaffordable. 

So there are ways, I think, with eliminating preexisting conditions, with going to a much more reasonable community rating system, to share the risk. That is what insurance is really about. I 

think that the experience I have had in the marketplace—those can 

be effective programs, but they need some barriers set at the outset 

to make sure that everyone has access to affordable high-quality 

coverage. 

The CHAIRMAN. Well, I appreciate that. We are going to have to 

move fairly quickly here. 

Senator DOLE. Could I just say one word? 

The CHAIRMAN. Absolutely. 

Senator DOLE. I need to go to another meeting, but it would really be helpful if you could get her confirmed before the recess, because she cannot even get into the building, and we are a little behind anyway. This is the issue of the year. 

The CHAIRMAN. Yes. 

Senator DOLE. So if you guys can all, you know, do something. 

[Laughter.] 

The CHAIRMAN. Yes. You are absolutely right, and that is why 

we are having this hearing. Senator, thanks for joining us, very 

much. You are absolutely right. That is why we are having this 

hearing, so we can get her confirmed this week. That is the whole 

purpose of all this. 

But anyway, thank you very much, Governor. Also, I appreciate 

very much your statement that, if I heard you correctly, the full resources of HHS, including CMS and other relevant agencies, will 

be available to help this committee with technical advice and design advice on how to put this together in the best possible way. 

Governor SEBELIUS. Well, Mr. Chairman, the agency, the Department, has enormous technical expertise, actuarial help, advisors, 

pooling help. If confirmed, I look forward to working with you and 

providing that expertise as a health reform bill is developed. 

The CHAIRMAN. Thank you. Thank you very, very much. 

Senator Grassley? 

Senator GRASSLEY. First of all, remember, I promised you that 

I would not ask you any questions that you were not informed of, 

so, if I do ask you a question you were not informed of, then you 

do not have to answer it right now. 

As we discussed at our meeting, I am fully committed to oversight. Chairman Baucus runs the committee the same way. I view 

oversight as my constitutional responsibility, and I think I have 

conducted vigorous oversight, despite whoever is in the White 

House. I intend to continue that in this Congress. 

To do that, I need your public commitment, if you are confirmed 

as the new Secretary. I need your clear public commitment that I, 

16 

as ranking member of the Finance Committee, will not be required 

to provide you with a chairman’s letter for the Department to respond to my letters and to provide me the Department’s documents 

that I might need to do this oversight work. 

And by the way, I do not have problems getting the chairman’s 

cooperation, but it is an extra step that we should not have to go 

through. So would you, as head of HHS, be receptive to my inquiries, and will you assure me that I will not need a chairman’s letter 

for the Department to respond to my letters and requests to interview HHS employees? 

Governor SEBELIUS. Well, Senator, first of all, I very much appreciate your focus on oversight. It is critically important to the taxpayers across America. I know it is a cause of yours, and a critical 

cause. If confirmed, I look forward to cooperating in that effort and, 

within the bounds of the law provided to me, I certainly will respond. As you know, you have already given me a binder of homework and an opportunity to visit, and I look forward to having responses to you. 

Senator GRASSLEY. All right. 

In regard to the False Claims Act, I have a couple of questions. 

I was the author of the 1986 amendments to that Act, and you 

would expect me to be a defender of it. It is my hope that you will 

also vigorously support the False Claims Act, and particularly one 

of its provisions that we call ‘‘qui tam.’’ Would you work cooperatively with the Attorney General and the Department of Justice to 

vigorously enforce the False Claims Act? 

Governor SEBELIUS. Absolutely, Senator. When I was insurance 

commissioner, we created a first-time ever fraud squad and vigorously worked with the Attorney General’s Office in Kansas to go 

after fraud and abuse. I have continued that effort as Governor, 

with an Inspector General who oversees the programs and the 

health spending in Kansas. 

So it is something that I am very much committed to, finding 

fraud and abuse, encouraging not only the whistle-blower activity, 

but I think it is an obligation of those who administer public programs to make sure that, if there is any information or evidence, 

that they come forward and that we act on it swiftly. 

Senator GRASSLEY. Since you agree with me that that is a good 

approach and one you even used in your administrative responsibilities in Kansas, I hope you would help us oppose efforts by industry 

groups, including the health care industry, to weaken the False 

Claims Act and qui tam provisions of the False Claims Act. 

Governor SEBELIUS. Well, I certainly would. I think it is very important that the public have confidence as we move in this new 

era, and with the resources under the Department of Health and 

Human Services, that those dollars are being wisely spent and that 

there is a transparency about what is happening with those dollars. So, I would absolutely like to work with you, if confirmed. 

Senator GRASSLEY. And qui tam relators are very important in 

carrying out what qui tam has done. I think I informed you, but 

let me inform everybody, that that has brought $22 billion back to 

the Treasury since it was enacted. Would you agree to promote a 

close working relationship with relators and HHS for the purpose 

17 

of reducing fraud, waste, and abuse in the Federal health care programs? 

Governor SEBELIUS. I certainly would. 

Senator GRASSLEY. Will you work cooperatively with me to ensure that a bill I introduced earlier this year, that obviously right 

now you do not fully know about, but it would restore the original 

intent of the False Claims Act, that you would review it and comment on it for the Department in a timely manner and with constructive input? 

Governor SEBELIUS. Certainly, Senator. If confirmed, I look forward to that. I do not know all of the details of the bill, but I look 

forward to reviewing it and discussing it with you and the Department. 

Senator GRASSLEY. Yes. And this will have to be my last question. 

As Governor, you are familiar with the low Medicare reimbursements that come to your State and my State. In Iowa, Medicare reimbursement is sometimes 30 percent below the payments for the 

same procedures in other parts of the country. That is a significant 

disincentive to keep physicians or get physicians and have quality 

care. It creates problems with recruiting and retaining physicians. 

As Secretary, would you work to reduce geographic disparities in 

Medicare payments and focus on rewarding physicians who provide 

high-quality care? 

Governor SEBELIUS. Senator, the issue of disparate Medicare reimbursement is certainly one, as you suggested earlier, that I am 

familiar with in Kansas. I know Senator Roberts has worked tirelessly on this as part of our rural health initiatives. It is of great 

concern to me, a concern that I will bring to the office of Secretary. 

I think the opportunity to shift the Medicare payment system 

across the board to rewarding quality and rewarding outcomes is 

something that we have not only an opportunity, but I think an obligation, to do. It is one of the building blocks for health reform and 

something that I very much look forward to working with you to 

accomplish, if I am confirmed as Secretary. 

Senator GRASSLEY. Thank you. 

Mr. Bingaman is temporarily out, so Mr. Roberts is next, then. 

Senator ROBERTS. Thank you, Mr. Chairman. Or excuse me. 

Thank you, Mr. Ranking Member. The chairman is back. 

Governor, I have three sort of rambling-rose questions, and the 

answer to all of them is ‘‘yes.’’ More than 25 million seniors and 

disabled Americans receive their prescription drug coverage 

through Medicare Part D, as you know. 

In Kansas, we have over 90 percent of our seniors who have this 

drug coverage. Seventy percent of those seniors are receiving their 

coverage directly from Medicare Part D, saving an average of about 

1,200 bucks per year. It is costing less than earlier government 

forecasts. CBO—sometimes I think they use a dart board—recently 

announced that Part D projected costs have dropped $520 billion 

over their original 10-year forecast. That is amazing. 

Given this, I have serious concerns with proposals to include a 

public plan in Part D. I know you think that the Part D model has 

worked well, and I hope that you will work together to continue 

that coverage. There is a gap in Part D. It is a problem for many 

18 

seniors, and you mentioned that when we had a hearing in the 

HELP Committee. I know that Senator Enzi is very concerned 

about this. 

But there is also a program, Patient Assistance Programs, that 

many pharmaceutical companies are offering to provide free or lowcost medicines to low-income patients. But the policy to date does 

not allow that PAP assistance—that is the acronym—to count toward catastrophic coverage under Part D. Beneficiaries who receive 

PAP assistance for some drugs must continue to pay their plan premiums and pay for any drugs not covered by a PAP without ever 

getting the benefit of the catastrophic coverage. 

I think that the beneficiaries should get to count that assistance 

toward their out-of-pocket cap in the same way we can count other 

charitable help. I would hope you would support making such a 

change, if confirmed, or when you are confirmed as HHS Secretary. 

A last observation: drug importation. The President’s budget proposal appears to support efforts to allow Americans to buy drugs 

from other countries. At Tuesday’s hearing, you also mentioned 

that you supported the idea of reopening this issue. Last year, contaminated blood thinner from China caused hundreds of Americans 

to have allergic reactions, and some deaths. 

The World Health Organization has noted that drug counterfeiting is now a $32-billion-a-year business, and growing very rapidly. As the former chairman of the Senate Intelligence Committee, 

I believe that this is a serious threat. I would ask you to get an 

intelligence briefing pretty quickly after you are confirmed. 

Before we move forward with any proposal to allow Americans to 

buy drugs from other countries, I think we have to demonstrate we 

can do so safely without any worry about a terrorist threat. We 

should demand that any drug imported into the United States meet 

the same high safety and efficacy standards of our Food and Drug 

Administration, including bio-equivalency standards. 

Do you have any comments on the three subjects that I have 

mentioned? 

Governor SEBELIUS. Well, Senator, let me just say, if I am confirmed as Secretary of HHS, I am committed to working closely 

with the members of this committee and the members of Congress 

on a whole variety of health issues that you have identified. There 

is no question that the Part D drug benefit has been enormously 

helpful to seniors across Kansas, seniors across this country. We 

used to deal with a lot of those seniors when I was insurance commissioner, prior to Part D, and had the most heartbreaking stories 

day after day of people who literally were given prescriptions by 

their doctor to keep them out of the hospital or cure an ailment, 

and absolutely could not buy both the drugs and food at the same 

time, or could not pay their rent and buy the drugs, or were cutting 

pills or filling one out of every three prescriptions. So there is no 

doubt that there have been many beneficial impacts of Part D. 

I think, as part of the overall health reform, we have an opportunity to make Part D even better. As you have suggested, there 

is now a gap in coverage that is very difficult for many seniors, 

particularly those who use more medications than others. They hit 

the donut hole first. 

19 

There are, in many cases, confusing programs, where seniors are 

trying desperately to sort out which program might be more beneficial for them because the drug components change on a rapid 

basis. So I look forward to having the opportunity to take a look 

at that and make sure that, as we look at reform, we look at comprehensive reform. Certainly affordable prescriptions for our senior 

and disabled population is a critical component of health reform. 

In terms of the drug reimportation, I share your concerns about 

the recent, whether it is the heparin issue from China or other stories that have been done on manufacturing sites which clearly are 

not being inspected on a regular basis. So while I support, and the 

President has indicated a support and proposed some budget 

money to begin to look at reimportation, I think it can only be done 

if the inspections are accomplished and that we are satisfied that 

the standards are equivalent or above American standards. That is 

going to take some time and some work. 

The Secretary has had the authority from Congress, if deemed 

safe, to engage in reimportation. As you know, in the past that has 

not occurred. It would be my commitment that that would not 

occur until I was satisfied, if I am confirmed as Secretary, that that 

safety issue is absolutely met. So, I look forward to working with 

you on that. 

Senator ROBERTS. I thank you for your answers. 

Mr. Chairman, I am going to spare the committee, since my time 

is up—way over up—of my rant on comparative research, which we 

had a vote on in the Senate. Unfortunately, I think that was the 

wrong vote. I know you spoke to that. Comparative effectiveness research, I am for that, but I want it on the clinical side. I do not 

want it to be the Holy Grail for CMS to play Lizzie Borden with 

our health care providers, and then we have to come back in and 

fix that, especially on the donut hole that the Governor has mentioned. But I really worry about this, and I know that you have 

worked very hard on it. 

I would just ask the Governor, I think I may submit a question 

in writing that would be more appropriate for this. But can you 

ride herd on CMS when they come in, and like the chairman has 

said, reimburse people at 70 percent, and then they have to make 

a decision as to whether they can make it or not, whether it is a 

pharmacist trying to help people with Medicare Part D, whether it 

is a hospital or a doctor or home health care, any provider out 

there who is not being reimbursed at cost. 

Yet, here we have CMS coming in again with actions, and I 

worry with this comparative effectiveness research, that that might 

again be the Holy Grail in the wrong way, Mr. Chairman. I am all 

for it in regards to patient care, but I worry about that being the 

golden ring that they will use to come in. Then doctors and home 

health care people say, we cannot afford this. I am not going to use 

my account. I am not going to offer my people Medicare. 

Now, I said I was not going to do a rant, but it is just like the 

oxygen tank thing about 2 years ago, so I will spare you that. 

The CHAIRMAN. Thank you, Senator, for sparing us your rant. I 

appreciate that. [Laughter.] 

I might say, you and I share the same goal on the clinical part. 

20 

Senator ROBERTS. I will ask you that in writing. I would hope 

that you would respond. 

The CHAIRMAN. We share the same goal. I am very glad you are 

raising a potential complication with it, but in the end I think you 

will probably agree that the basic policy is a good policy. It just has 

to be worked out right. All right. 

Senator Stabenow, you are next. 

Senator STABENOW. Thank you, Mr. Chairman. 

The CHAIRMAN. But thank you, Senator. 

Senator STABENOW. We very much appreciate the Senator not 

speaking about that topic that he just spoke about. We appreciate 

that. [Laughter.] 

Welcome. It is wonderful to see you, and I look forward to working with you in your new capacity as Secretary. I appreciate the 

fact that we have an opportunity to talk about a number of things, 

administrative fixes for the Medicare reimbursement system for 

physicians, which I know you are looking at and appreciate. 

You are really considering how to improve Medicare, generic 

drugs, health IT, which Senator Snowe and Senator Enzi and I 

have worked on together, and how we implement that, which is so 

important given the dollars in the recovery package and so on. 

There are so many different issues that we all care about around 

health reform. 

But I am going to take my time to talk about something we do 

not talk a lot about in the context of health reform that I believe 

very strongly needs to be a part of that, and that relates to mental 

health services. Mental illnesses are among the most expensive and 

disabling chronic diseases. 

In fact, the World Health Organization has pronounced mental 

health disorders to be the leading cause of disability in the United 

States, based on burden and disease. Mental illnesses often accompany, and greatly increase, the cost of treating other chronic diseases. So it is all connected. But when we talk about health care 

reform and chronic diseases, we usually do not include mental 

health issues. 

Individuals with serious mental illnesses die, on average, 25 

years earlier than the general population due to the lack of adequate care coordination, preventative measures, and the fact that, 

again, it is often tied to diabetes, heart disease, cancer, asthma, 

and other kinds of things. So I think it is very important that we 

be including that when we talk about health care reform. 

So a couple of questions. What would you do as Secretary to ensure that in fact mental health conditions are included in health 

care reform initiatives? And second, how would you see your role 

in improving the integration of mental health and primary care for 

children, as well as for adults? 

Governor SEBELIUS. Well, Senator, I think you have identified a 

critical need. I was very proud of the work I was able to do in Kansas as a leader in the effort to pass legislation mandating mental 

health parity, so that we currently have provisions in the law 

which require health insurers to provide mental health parity to 

the physical health insurance that is being delivered. 

I am pleased that the reauthorized CHIP bill has a mental 

health parity component in it. I think that is a big step forward. 

21 

There is no doubt at all that, as we look at health reform, mental 

health coverage is a critical part of making Americans well and 

healthy, and early identification, ongoing treatment, access to psychotropic drugs, in addition to other prescription drugs, are critical 

components. 

I am alarmed, as are many across the country, in the growing 

numbers, the growing evidence that we have a lot of undiscovered 

depression in children, undiscovered psychiatric trauma in children 

that often—luckily in somewhat rare cases—is acted out in the 

worst possible incidents, but if found earlier it would be very helpful. We know we have dozens of people, thousands across the country, maybe millions in our prisons who are really the victims of 

mental health diseases that helped to trigger criminal activity. 

So I think we are paying the cost in probably the least effective, 

most expensive way, and making sure that mental health services 

are incorporated as we move forward on health reform is certainly 

a commitment that I would love to work with you on, if confirmed. 

We also, in the Department, have the Agency for Substance 

Abuse and Mental Health Treatment, and I think that is another 

important asset to make sure that, not only those voices are at the 

table, but that agency assets are used to maximize the coverage 

and care for people across America. 

Senator STABENOW. Thank you very much. 

One other quick question. I wonder if you might just speak, in 

terms of FDA and NIH, about how you would move us in terms of 

being able to ensure discovery and market access to safe, effective 

new breakthrough medications. You know, we are so close in so 

many areas, but we have diseases like Parkinson’s, Alzheimer’s, 

and juvenile diabetes, and so many other areas where we need to 

be moving much more quickly to be providing the resources and 

finding the treatments and the cures. 

Governor SEBELIUS. Well, Senator, I share your enthusiasm 

about the potential for cures in the near future. There is no question that we have the most innovative and technologically savvy 

scientists in the world right here in America. 

So one of the commitments I would make to you is that, as Secretary, if I am confirmed and have an opportunity to serve in this 

capacity, we will lead with science—whether it is the National Institutes of Health, CDC, or other entities, the FDA—that sciencebased, evidence-based research will be the primary goal, to unlock 

the creativity and ingenuity of the researchers who currently are 

often curtailed in their ability to find the cures and reach that potential. 

The CHAIRMAN. Thank you, Senator. 

Senator Wyden, you are next. Senator, I have to leave. I have to 

go to the floor to speak on a Medicare amendment, so you are in 

charge. 

Senator WYDEN. Thank you very much, Mr. Chairman. 

Governor, reformers are glad that you are coming to town. It is 

obvious this is the hour, this is the time. We are going to be working with you, under our chairman’s leadership, day in and day out 

to meet the President’s time table. We are going to meet that 

1-year time table and end 60 years of gridlock. 

22 

Now, the history of past health reform efforts is that they have 

tanked, largely for two reasons: you cannot come up with a plan 

to pay for it, and particularly you cannot come up with a way so 

that people who have coverage today and are relatively satisfied do 

not feel that health reform is going to hurt them. So I think it is 

very important to show that you can make savings today out of the 

$2.5 trillion that is being spent, and I think you can do it in a way 

that addresses those two past concerns. 

Now, one of them is part of health reform and several of them 

are part of your Department, and I want to touch on each one. In 

terms of health reform, where the money is, is the tax code. I am 

convinced that it is possible to completely protect middle-class folks 

from any tax on their health care, while at the same time going 

out there and wringing some significant savings from some of these 

designer smiles and the like that are paid for with Federal tax 

money. So that is one area where you can make significant savings 

now, and at the same time address those concerns of people who 

have coverage. 

Three of them are within your Department. One of them is generic drugs. You look, for example, at the fact that Costco or WalMart charges a walk-in customer without insurance much less to 

fill a generic than some of these Part D plans, the insurance plans, 

do. You say to yourself, there is an area where Governor Sebelius 

can go in and make some savings now. 

I also think that prevention—and you have already done some 

imaginative work as Governor, to look at savings in the prevention 

area. We have talked about that. And cutting fraud. Those three 

areas—generics, promoting prevention, and cutting fraud—are 

within your Department, when we get you confirmed, and then this 

tax code area is where the big money is in terms of health care reform. So, your thoughts on how you find savings now so that people 

do not say, oh, they are going to spend a trillion bucks and not 

make any savings for a long time. 

Governor SEBELIUS. Well, Senator, first of all, I want to recognize 

your leadership and efforts in a bipartisan fashion to put together 

a health bill that has a lot of elements that I think are likely to 

be part of what ends up as the final bill considered by Congress. 

So, thank you for that leadership work, and thank you for your 

willingness to tackle this issue in advance of getting to this historic 

time. 

You and I had a chance to talk about the fact that it is very important to find savings. I am a believer that that is a critical part 

of an agency where there is a $730-billion budget. I am a believer 

that a crisis requires us to do things in a different way and re-look 

at every service delivery effort. When I was elected Governor of 

Kansas, we had a difficult budget time. Not quite as difficult as 

this time, but it was very difficult. 

I was faced with an enormous budget challenge and ended up 

finding a way to close a billion-dollar budget gap by doing things 

in a different way without raising taxes. So, my approach and experience is really re-looking at every avenue and trying to identify 

ways that we can save money. Your road map for generic drugs— 

as you know, I am a believer in competitive bids for drugs and in 

finding ways. 

23 

We are paying more for Medicare Part D drugs than we are for 

those same drugs in the Medicaid program for dual-eligible Americans. So we currently are over-paying, if you will, for some of the 

exact same medications. I think there are some more aggressive, 

and frankly consumer-friendly ways that we can promote more generic drug use which is often resisted down the road. 

There is no question that prevention, I think, yields huge results. 

As you say, we have engaged in an effort in Kansas, in our State 

employee plan, to really have a significant focus on not only an individual health record, but then financial incentives for employees 

who will do everything from smoking cessation programs to weight 

loss programs to exercise programs. I think it is likely to pay significant dividends. We are already seeing some early evidence of 

that, but I think there is more down the road. 

Certainly, as Senator Grassley has already indicated, fraud and 

abuse is an enormous area. Not only is it a significant area for cost 

savings, but I am a believer that, whether it is providers or patients or companies who are fraudulently billing, fraudulently exploiting our health care system, they are really stealing from Americans who desperately need those dollars for health services. So, I 

take that very seriously and look forward to working with you, if 

confirmed as Secretary. 

Senator WYDEN. Good. Governor, I think you are going to do a 

first-rate job. My time has expired. I only would like to offer up 

that I think getting these savings and showing people that you are 

wringing more value out of the $2.5 trillion is the lynch-pin to getting public support for people in the start-up costs area for health 

care reform. In other words, if they just say they are going to spend 

more money and I do not see any savings, you lose some of your 

support for paying for those start-up costs for health reform. I am 

looking forward to working with you. 

Our next Senator will be Senator Nelson of Florida. 

Senator NELSON. Thank you, Mr. Chairman. That has a nice ring 

to it. 

Madam Secretary-designate, you are going to be great, and we 

are lucky to have you. One of the areas that we are going to try 

to squeeze some money out of is to allow the Federal Government 

to negotiate for the Medicare Part D drugs. Now, there are a lot 

of vested interests, including insurance companies and pharmaceutical companies that do not want this to occur, which was part 

of the reason that the bill was not passed in the first place 4 or 

5 years ago. 

But, if we did pass a law where Medicare could negotiate prices 

for drugs, that would be under your jurisdiction. 

Governor SEBELIUS. Yes, sir. 

Senator NELSON. Would you manage that aggressively? 

Governor SEBELIUS. Senator, I would look forward to managing 

that aggressively. Currently, both in my service as insurance commissioner—and we were able to serve in that capacity together for 

a number of years, and I appreciated that—and now as Governor, 

I am a key member of the State Employee Insurance Board. We 

have negotiated for drug prices aggressively, I would suggest, and 

effectively for our State employees who enjoy a wide choice of preVerDate Nov 24 2008 16:17 Mar 04, 2011 Jkt 000000 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 R:\DOCS\64441.000 TIMD
24 

scription drugs, but also at a very reduced price. We have done the 

same thing in our Medicaid program, negotiated effective pricing. 

Recently, for the State agencies that buy prescription drugs, 

starting with our prison health system, we negotiated a very successful price and then opened up that pricing to city and county 

governments, so jails and community correction centers could use 

that same competitive bid. 

So, I am a believer that competitive bidding and negotiation is 

an effective strategy. I mean, it certainly should not limit the 

choices that providers have to prescribe drugs and does not lead to 

that, but can be much more effective for consumers. 

Senator NELSON. We are going to get a lot of resistance as we 

approach legislation on this, because the cry will be, well, the Federal Government would be unfair as a competitor to all of the drug 

plans because the Federal Government then would start having 

price control. But that is part of the competitive system. I have 

seen it work in the Veterans Department for over 2 decades. You 

have to be concerned about a formulary, and there will be some 

problems there that, if you are going to negotiate prices, you have 

to have a certain formulary so these drugs are covered. 

So, there are a lot of twists and turns. But the fact is, the Veterans Administration, using millions of folks who are receiving 

those benefits, does get its drugs at a lower cost because they are, 

in fact, bulk purchases. 

Governor SEBELIUS. That is correct. 

Senator NELSON. So it seems to me common sense that we ought 

to be looking at bulk purchases with Medicare. 

Let me identify one other little nuance that you are going to be 

facing, and that is, if we are successful in the reform of health care 

and we start to get some of these 46 million people who now do 

not have health care insurance to get health insurance, if we are 

able to get them into the system—of course, we know these 46 million still get health care, but often they get it at the most expensive 

place, which is the emergency room, at the most expensive time, 

which is when the sniffles have turned into pneumonia. If we are 

successful in doing that in this health reform package, 46 million, 

or say half of that, 23 million new people in the system, we are 

going to need new doctors, we are going to need new health care 

providers. We have great medical schools all over. Here is what 

happens. I will give you the example of Florida. We educate a lot 

of doctors, but then, when it comes to having the residencies, we 

do not have them because back in the late 1990s the Medicaresponsored residency program was frozen. 

As a result, since 1998, any State that has been a growth State— 

like Florida, like Nevada, like Arizona, California, et cetera—has 

been severely penalized because we educate the doctors and then 

they go have their residency in another State, and it is very typical 

that doctors will stay and practice where they did their residency. 

Now, that is something we have to address. Do you want to comment on that? 

Senator WYDEN. Governor, as much as I agree with Senator Nelson, we are going to have a vote in a few minutes. So, if you can 

answer quickly, then we are going to try to get all of our colleagues 

in. 

25 

Senator NELSON. All right. 

Governor SEBELIUS. I would love to work with you on that, if confirmed. 

Senator WYDEN. Excellent. Good point, Senator Nelson. 

Senator Schumer? 

Senator SCHUMER. We have just seen the advantage of having an 

elected official be nominated for a position rather than somebody 

who does not have the experience. Excellent answer, Governor. 

[Laughter.] 

I am delighted that you have been nominated by the President. 

I think you will be a great Secretary. 

I want to focus a little on the public good aspect of health reform. 

I think it gets a little bit lost in the discussion. Public good, such 

as prevention and screening for diseases that can be effectively 

treated, or even cured, with early intervention, health information 

technology, which as you know the President is very, very eager to 

have happen. 

So what I have been grappling with—as you may know, I am 

working on the concept of a public plan option here in the Finance 

Committee—the chairman has assigned me to focus on that—is, 

how do we get the most cost-effective, high-quality insurance products to Americans, what ingredients are essential, and who does it 

best? For-profit plans, nonprofit, Medicare, other plans? What are 

the trade-offs? 

Like you and President Obama, and millions of Americans, I believe we must have a federally guaranteed public plan option. It is 

not going to be enough to have private plans providing health insurance, but—and there is not a consensus on that, as the comments from my colleagues from Iowa and Utah have made clear— 

even within those of us who believe in a public plan option, there 

is a great deal of discussion of how it ought to be structured. That 

is what I want to explore with you. I think we can make this effective, not just a political sort of toy or weapon to be brandished by 

one side or the other. 

So here are some questions for you: first, do you agree that a 

public insurance plan option will help level the playing field and 

ensure that everyone has an affordable option? Will it put pressure 

on the for-profit, and even the not-for-profits, to incorporate more 

of these public goods? 

Governor SEBELIUS. Well, I certainly, Senator, think that a public plan, if constructed effectively and wisely with some actuarial 

help and support, can be a very effective tool in providing one more 

choice and option to American consumers. 

Senator SCHUMER. Good. 

One other reason to have a public plan. In a lot of metropolitan 

areas, I think 76, one insurer has a preferred provider organization 

market share of greater than 50 percent; in 64 percent of metropolitan areas, one insurer has an HMO market share of greater 

than 50 percent, and a significant number of areas have single insurers with 70, or even 90 percent of the market. 

So is it not true that a public insurance plan option would at 

least ensure that there is some degree of competition in these types 

of areas? 

26 

Governor SEBELIUS. Well, Senator, I share the President’s commitment that, first of all, Americans who have coverage that they 

like should be able to keep it, but second, that Americans who are 

looking for coverage should have some choices. As you just said, 

often when you get 60, 70 percent of the market share, you have 

a monopoly, and it really does not operate in a competitive environment. 

Senator SCHUMER. And that has happened in a lot of markets, 

is that not true? 

Governor SEBELIUS. That is correct. 

Senator SCHUMER. Too many—far too many—in my opinion. 

Let me ask you this. I want to stay within the time limits so my 

colleagues have chances to ask questions. 

Do you think that a federally guaranteed option could be a gold 

standard, help consumers make more informed choices about what 

health plans are delivering the best value and the best plan that 

would best fit their needs? In other words, a public plan, again, by 

its definition, would incorporate more of these other types of public 

goods. 

The second question, and then I will let you answer and finish: 

could that be achieved if the option were not an expansion of a 

Federal program, but a new hybrid, perhaps even run by a private 

insurer? 

Governor SEBELIUS. Well, Senator, I know there has been a lot 

of discussion about hypothetical public plans, but let me give a couple of practical examples. Thirty-plus States in the country, including Kansas, have a public plan side-by-side with private-market 

plans in our State Employee program. It operates very effectively. 

State employees choose. 

They have an opportunity to take a look at which is best suited 

to themselves and their families. There has been no destruction of 

the marketplace. In California, in the Medicaid program, there are 

numbers of large counties in California where a public plan operates side-by-side with private plans. So we have examples throughout the country, very competitive, very effective strategies where 

the plans, public and private, compete on the basis of benefits, innovation, and cost, which I think is exactly what we would want 

to offer the American consumers. 

Senator SCHUMER. Right. Thanks. I mean, it seems to me that 

a public plan, in the history, as you show, does not swallow up the 

private plans, but more or less keeps them honest, if you will. 

Governor SEBELIUS. Well, if it is effectively constructed, if we use 

insurance rules that make sure you do not have adverse selection, 

that you do not tilt the playing field. The President is very committed to a level playing field. But it absolutely can happen and 

it exists, and has existed successfully across the country. 

Senator SCHUMER. Thank you. 

Senator WYDEN. Senator Enzi? 

Senator ENZI. Thank you, Mr. Chairman. 

I want to thank the Governor for her willingness to serve in this 

position and the tremendous knowledge that she brings to it. 

Health care, of course, is one of the primary things that both the 

HELP Committee and the Finance Committee are talking about. 

Of course, there are four of us on this committee who serve on that 

27 

committee as well, so I kind of look at myself and the other three 

as a liaison between the two. 

It is going to take some tremendous coordination to cover the 

various jurisdictions. As you know, there are more moving parts to 

this than anything else. There are more stakeholders to health care 

than anything else. In fact, I cannot think of anybody who is not 

a stakeholder in health care, or should be a stakeholder in health 

care. As insurance commissioner, you have tremendous background 

in understanding how that market works, and that is not something very many people understand. 

I was pleased to work with Senator Daschle, and I think I was 

one of the great promoters of his book, which I think gave one of 

the best histories of health care reform and a number of great suggestions, and a number of flaws in past procedures. When he appeared before this committee, I asked him the question that I 

asked you the other day about whether health care ought to be in 

reconciliation. He said, ‘‘No, it should not be.’’ That is because of 

all of the moving parts and everything. 

So I hope that I can persuade you—not at this moment; I am not 

even going to ask you the question again—that that not be. The 

main reason for that is that Senator Roberts, Senator Hatch, and 

I have a great responsibility for keeping the Republicans calm during this debate, because, if we get to a point where nobody is listening, we cannot get it resolved. 

Governor SEBELIUS. Sure. 

Senator ENZI. That is the feeling that I have, if it goes with— 

not that I have, but that I am getting from my colleagues—that if 

it goes into reconciliation, then that is an indication from the other 

side that they are not going to listen because they do not need to 

listen. We are going to have to listen to each other. We are not 

going to be able to negotiate this package in a meeting like this, 

in a hearing. It is going to have to be done with people taking the 

different parts that they have an interest in and a knowledge of, 

and sitting down and working it out. 

Yesterday we had a fascinating debate on the floor on this comparative effectiveness. But we were talking about cost effectiveness 

and clinical effectiveness, and the two sides were not listening and 

both sides resolved it to their own satisfaction. But we are going 

to have to come together on that issue. The biggest thing we are 

going to have to do is come up with a whole other name that does 

not have the letters C, or E, or R in it in order to get past that. 

[Laughter.] 

So, I just hope that you will help us in that endeavor. It is possible, if things go through the regular process, that we can get 

things done. The National Service Act that was finished last week 

is an example of that. It was the first big review of it in 16 years, 

and it passed by a very significant number. So I guess my request 

is that you will help us to get things through regular process and 

the complete process, and help me and others keep everybody calm 

and listening until we get to that point. Would you agree with 

that? 

Governor SEBELIUS. Well, Senator, I have already learned some 

important lessons from you. One of them is the 80/20 rule. We 

talked about that in your office and talked about that in the HELP 

28 

Committee. I would say that it is certainly my experience of how 

I have acted as a public official. I have typically been an elected 

official in the minority party, with significant majority members of 

the legislature or the voting public. 

So I really very much not only believe in bipartisanship, but 

would have never gotten elected or gotten anything done without 

working in a very bipartisan fashion. I share the President’s commitment that health reform be a bipartisan approach, so I look forward to working with you, if confirmed. 

Senator ENZI. I appreciate that. I do think we can get it done 

this year. I have a number of other questions, but I will submit 

them and give up the rest of my time. Thank you. 

Senator WYDEN. I thank my colleague. 

[The questions appear in the appendix.] 

Senator WYDEN. Let us go to Senator Snowe. I think with a little 

luck, we can get Senator Cantwell and Senator Carper all in before 

the vote. 

Senator SNOWE. All right. Thank you. Thank you, Mr. Chairman. 

Welcome, Governor Sebelius. Congratulations on your nomination. Your appointment comes at a transformational time, particularly with the reform of health care. It generally comes once in a 

generation, if that, so you will be at the forefront of this great debate. So your experience and your background will certainly make 

an enormous contribution to this effort. 

Getting back to the government-sponsored health plans, I know 

that that is a key issue as we go forward on health care reform. 

It is reminiscent of the debate that occurred on Part D when we 

were working on developing a prescription drug plan, and there 

was a fear that there would be a lack of competition among plans 

for that market. 

In fact, we did create a government fall-back in response to that. 

If an area did not have any plans, there would be government fallbacks, so there had to be two or more plans to offer competitive 

prices before the fall-back would be kicked in, and it never has. So 

I think that is an indication of the number of options that were out 

there. 

In fact, many people complained there were too many options to 

sort through in response to creating that single greatest initiative 

since the Medicare program was created. So, in looking at the government option, are there not better ways to attack that problem? 

We set up standards in our Small Business Health Insurance Plan 

that Senator Durbin, Senator Lincoln, and I have introduced for 

small business health insurance. 

What we do is set up standards, so that there is at least one 

plan, a standard plan, so there are not different rating rules, there 

are not different mandated benefits, and so on. So there is a possibility of setting up certain standards for private insurers to ensure 

and guarantee that there is one standard benefit plan that could 

be offered to consumers rather than opting for a government-run 

plan that ultimately could end up being far more costly. It could 

end up taking the sickest and the private insurers taking the 

healthiest. I mean, the list goes on. I mean, government should be 

the last resort, not the first, when it comes to something so monumental. 

29 

Governor SEBELIUS. Well, Senator, I share your belief that a 

competitive market is often the preferable strategy, and certainly 

the competition works far better in most instances than heavy regulation. I do think it needs to be an option that is considered. The 

President clearly supported a public plan option as he outlined his 

thoughts about health reform strategy, and I think is open to a variety of opportunities to discuss it. 

I do think it is important to take a look at what is going on 

around the country, because clearly there are very successful sideby-side competitive options. As I say, most State employee health 

plans right now have a public option side-by-side with private insurers. It has not destroyed the market, it has not tilted the playing field. But that is all about the way the rules are set. 

As you say in your SHOP bill that you and Senator Durbin and 

Senator Lincoln have worked on, you can construct standards. It 

may be at the end of the day that the standards are effective 

enough that the competition from a public plan is not a valuable 

asset, but I think it is part of the conversation going forward and 

something that needs to be looked at. 

Senator SNOWE. Well, I appreciate that. I hope that we can continue to have that discussion and conversation, and perhaps not solidify in our positions as we go forward on this crucial debate. 

I have a question on drug importation, in response to my wonderful colleague from Kansas. Senator Durbin and I have introduced repeatedly this legislation. It is interesting to know, because 

we import drugs from Europe that have had parallel trading for 

more than 30 years without incident, and New Zealand, Japan, and 

Canada. Now, it is interesting. We provide a fee on imported drugs 

so that we could address not only inspections, but requiring FDA 

inspections, having anti-counterfeiting technology, and so ensuring 

all the safety standards that are crucial. 

Currently, FDA does not have those resources, frankly. I mean, 

they do not even inspect facilities every 10 or 12 years. It is an appalling track record. Our bill provides the resources, and we only 

use those countries where they have the highest of standards, and 

yet we are importing drugs from China, for example, and we are 

not inspecting the facilities. We have more than 700 drugs coming 

out of China and India, for example. 

We know what the problems are, which I think is sort of ironic, 

that we are importing drugs that are manufactured in facilities 

that are not inspected by FDA, yet there is such strong resistance 

to our drug importation bill that allows importation from countries 

that have the highest standards, and we have the highest standards for safety inspections that we should replicate in the domestic 

market, frankly, and we provide for the funding for a total inspection of this so it allows the competition for prescription medications. So I will urge you to look at that piece of legislation in the 

way we are able to construct it. I think, frankly, it is a way of going 

forward. 

Senator WYDEN. Governor, very briefly so we can get our colleagues in. Did you want to make a brief response, Senator Snowe? 

Senator SNOWE. Yes, I will. 

Senator WYDEN. Good. 

Senator Carper, also a Governor. 

30 

Senator CARPER. Welcome, welcome, welcome. Our terms as Governors did not overlap. I am mindful of the work that you did as 

Governor, and am very respectful of the work that you did as Governor. 

And while part of me wishes you were sitting on this side of the 

dais instead of that one in the years to come, we are just delighted 

that we will have a chance, I hope, to work with you and very 

much value you as a leader. 

One of the things I would like to focus on, along with some of 

my colleagues here, is how will we address the waste and inefficiencies in our government? The Congress passed, during the last 

Bush administration, something called the Improper Payments Act, 

which says that every year we ask all the Federal agencies to report improper payments. Last year, we found out that there were 

$72 billion in improper payments that were made by a whole lot 

of Federal agencies. It does not include Medicare Part D, does not 

include much of Homeland Security, but there were a lot of improper payments. A fair amount of that was actually from Medicare 

and Medicaid. 

I think I mentioned to you, when we had a chance to talk, that 

about 3 years ago a post-recovery demonstration project was begun 

with respect to Medicare overpayments in three States: California, 

Texas, and Florida. I think the first year of 3 years, almost nothing 

was recovered; the second year, a little bit was recovered; and the 

last year, I am told, about $700 million was recovered. We are 

doing that in three States. We need to do it in 47 other States. My 

hope is that we are going to do that, and we will do that. I would 

urge you to make sure that that happens. 

The other thing I would suggest, GAO met with us not long ago, 

and we talked about that progress in those three States. They said, 

if we can do that in Medicare, maybe we can have some similar 

achievements in Medicaid. You have done some interesting things 

in your State with respect to—I think you use a Smart Card. We 

call it a Smart Card in working with your Medicaid population. I 

do not know how familiar you might be with that particular initiative, but if you are and you feel like you could tell us a little bit 

about how it works and how it might help us at the national level, 

that would be great. 

Governor SEBELIUS. Well, Senator, first of all, I am absolutely 

committed to—as we talked to Senator Wyden and others about— 

aggressively working with all of you, if confirmed, on waste, fraud, 

and abuse. I think it is an important part of finding the savings 

that we are going to need to transfer to health care services. 

What we have done in Kansas is really convert from a paper 

card, which is distributed and too often could be lost or copied 

fraudulently or used by somebody else, into more of a Smart Card, 

which is a more permanent record of services for Medicaid patients. 

It is an easier billing system. It brings together the technology to 

have, I think, more information about patients available for providers and for pharmacists, and frankly gives us some ongoing 

oversight into actually what services are being used. 

So we became, I think, the first State in the country to use the 

nationally recognized technology to make that shift. It has just occurred in the last couple of months, but I will certainly be happy 

31 

to bring that expertise to my new job, if I have the opportunity to 

serve. 

Senator CARPER. Thank you. 

When we met, we also talked about fitness, nutrition, and prevention which are helpful tools in addressing our health care costs. 

I think something like a third of our young people in this country 

today are either obese or in danger of becoming obese, and something like 50 percent of their parents and grandparents are obese 

or are in danger of becoming obese. I would just like to ask, we 

talked about work-out regimens. I have been pretty faithful to that 

sort of thing. But what do you see as the government’s role in promoting prevention and wellness? What can we do to incentivize a 

lot more people to become healthier? 

Governor SEBELIUS. Well, Senator, again, back in my home State 

of Kansas, I took this effort very seriously. We have a whole series 

of initiatives going on. One, we have talked about a little bit with 

Senator Wyden, in the State Employees Program, with a personal 

health record and encouraging and incentivizing State employees to 

take a series of steps. We have a Healthy Kansas strategy, which 

is currently brought together by cabinet officers, from everybody 

from the secretary of Aging, to our health officers and our education commissioners, to look at healthy children in schools, 

healthy workers in a workplace, healthy seniors. 

There is a whole host of strategies—what is being served at the 

lunch counter, working with parents’ groups, getting some of the 

fattier drinks out of vending machines, or at least blocking their 

ability to access the vending machines during school hours, reintroducing PE in schools, having strategies about community health 

workouts. So we have healthy community awards, healthy school 

awards, healthy senior awards. We have thousands of seniors involved in the STEPS program, which is, again, an exercise strategy 

and a wellness strategy. So I think there is a lot we can do. 

I was very pleased to see that in the Recovery Act there is a significant investment in prevention for the Department of Health 

and Human Services, $1 billion, focused on a national prevention 

effort so we really have the opportunity to get the best strategies 

and hopefully have a major impact on the health of Americans by 

promoting personal responsibility and making sure that people understand they have a responsible way to put themselves in a better 

condition. It is not only lowering health costs, but it is very good 

for their life value. 

Senator WYDEN. Governor, you and Senator Carper are making 

such important points, but we have to go to Senator Cantwell. 

Senator CANTWELL. Thank you, Mr. Chairman. I know a vote has 

started, so I will be brief. But Governor Sebelius, again, congratulations on your nomination. 

Governor SEBELIUS. Thank you. 

Senator CANTWELL. We look forward to working with you. We 

hope your confirmation process goes smoothly out of here and 

quickly to the floor, and that you can begin this work in earnest. 

I wanted to cover a little bit of ground that Senator Grassley covered in regards to geographic adjustments in reimbursement rates. 

Your State of Kansas and my State of Washington have been very 

good on these basically high-quality, low-cost delivery systems. I 

32 

think Kansas is something like, per Medicare enrollee, it is averaged about $7,400, and for Washington State, $7,100. So we are, 

according to Dartmouth research, on the better end of outcomes 

and better end of low costs. 

So what do we need to do to get the rest of the Nation to adopt 

this plan? 

Governor SEBELIUS. Well, Senator, I definitely think that Medicare, as we look at comprehensive health reform, can be a leader 

in this area. One of the leading strategies is to really shift the payment system to providers so that we are looking at outcomes, quality health outcomes, and not numbers of contacts, which often now 

drives the payment system. Certainly looking at the States, and 

Washington State is one of them, where, in fact, your positive 

health outcomes are often a penalty in the reimbursement strategy, 

the realignment of payment to quality, payment to health outcomes 

is certainly a strategy I am very committed to, and I would love 

to work with you, if confirmed, on making sure that that is part 

of how we reform the building blocks of the health care system. 

Senator CANTWELL. Thank you. I certainly will look forward to 

working with you on that. 

The second question is on long-term care, where we see recipients are about one-fourth of the Medicaid population, but they are 

two-thirds of the Medicaid costs. One thing that I am interested in 

is building on the utilization of home- and community-based care 

services. We have shown again in the Northwest that, by focusing 

on that, you can have huge cost savings in the delivery of care. I 

think it is, nursing homes are something like 70 percent more than 

community-based care programs in cost delivery. 

So what do you plan to do as Secretary to help utilize home- and 

community-based services as a way to provide those services before 

people are forced into Medicaid and into nursing homes? 

Governor SEBELIUS. Well, Senator, I share your interest and 

commitment to looking at a much more community-based strategy. 

It not only lowers the cost, but it is much better for the Medicare 

recipient. Most people would much prefer to be in their home with 

some wrap-around services and some assistance than be forced actually into a nursing home setting. 

So I think that we have done some good work in Kansas that I 

would intend to kind of bring with me, where we have shifted to 

a continuum of care approach and early intervention to try to make 

sure that we reach seniors and their families before they have exhausted both their resources and their time and energy and wrap 

care around seniors so they can live independently for much longer 

periods of time. It would be those kind of strategies that I think 

can be very effective nationally in not only lowering costs, but 

much better outcomes for seniors. 

Senator CANTWELL. And is that something you think that we can 

get done this year as we discuss health reform? Do you think it is 

a priority within the ranking of issues? 

Governor SEBELIUS. You know, I do. I think that there are enormous assets in the Department of Health and Human Services 

which need to be the building blocks for health reform. So, as we 

talk about ways that we begin to reform the system, we can do a 

lot of reforming within the Department of HHS, driving toward 

33 

quality, prevention issues, implementing health IT, rolling out the 

CHIP program, making sure that the building blocks of Medicare 

and Medicaid are as efficient and effective and have the best health 

outcomes possible. All of that can be done without any legislative 

approach, because the assets and the resources are there. 

So I would very much see that as part of our responsibility and, 

if I am confirmed as Secretary, would put it as a high priority on 

the agenda, not just working with Congress on the legislation, but 

making sure that we are using the assets in the agency to really 

drive health reform. 

Senator CANTWELL. Well, thank you. I thank the chair. I look forward to working with you on both of those issues. I think they are 

incredibly important in driving down the costs that the Federal 

Government is not just now experiencing, but going to be experiencing in the future as we see a larger baby boom population 

reaching the retirement age and wanting to utilize those services. 

So, if we can move the rest of the Nation to the efficiency that 

some States have had, driving down the reimbursement rate and 

move people into more cost-effective long-term care scenarios, I 

think it will be good for the Federal Government and taxpayers in 

keeping down our costs. So, thank you. 

I thank the chair. 

Senator WYDEN. Governor, with a vote on the floor, you get 

spared any windy closing statements. Let me just leave you with 

one thought. In the history of this committee, it has never gotten 

out of the gate faster on the cause of fixing health care than under 

Chairman Baucus, with the support of Senator Grassley. 

I think that is a message to you that this committee, on a bipartisan basis, wants to work with you. We want to see you get confirmed, we want to see you get confirmed quickly, and then we 

want to go to work. So we look forward to those days, and we 

thank you for this morning’s session. 

Governor SEBELIUS. Thank you, Senator. 

Senator WYDEN. With that, the hearing is adjourned. 

[Whereupon, at 12 p.m., the hearing was concluded.] 

(35) 

A P P E N D I X 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD


64441001.eps
36 


64441.002
37 


64441.003
38 


64441.004
39 


64441.005
40 


64441.006
41 


64441.007
42 


64441.008
43 


64441.009
44 


64441.010
45 


64441.011
46 


64441.012
47 


64441.013
48 


64441.014
49 


64441.015
50 


64441.016
51 


64441.017
52 


64441.018
53 


64441.019
54 


64441.020
55 


64441.021
56 


64441.022
57 


64441.023
58 


64441.024
59 


64441.025
60 


64441.026
61 


64441.027
62 


64441.028
63 


64441.029
64 


64441.030
65 


64441.031
66 


64441.032
67 


64441.033
68 


64441.034
69 


64441.035
70 


64441.036
71 


64441.037
72 


64441.038
73 


64441.039
74 


64441.040
75 


64441.041
76 


64441.042
77 


64441.043
78 


64441.044
79 


64441.045
80 


64441.046
81 


64441.047
82 


64441.048
83 


64441.049
84 


64441.050
85 


64441.051
86 


64441.052
87 


64441.053
88 


64441.054
89 


64441.055
90 


64441.056
91 


64441.057
92 


64441.058
93 


64441.059
94 


64441.060
95 


64441.061
96 


64441.062
97 


64441.063
98 


64441.064
99 


64441.065
100 


64441.066
101 


64441.067
102 


64441.068
103 


64441.069
104 


64441.070
105 


64441.071
106 


64441.072
107 


64441.073
108 


64441.074
109 


64441.075
110 


64441.076
111 


64441.077
112 


64441.078
113 


64441.079
114 


64441.080
115 


64441.081
116 


64441.082
117 


64441.083
118 


64441.084
119 


64441.085
120 


64441.086
121 


64441.087
122 


64441.088
123 


64441.089
124 


64441.090
125 


64441.091
126 


64441.092
127 


64441.093
128 


64441.094
129 


64441.095
130 


64441.096
131 


64441.097
132 


64441.098
133 


64441.099
134 


64441.100
135 


64441.101
136 


64441.102
137 


64441.103
138 


64441.104
139 


64441.105
140 


64441.106
141 


64441.107
142 


64441.108
143 


64441.109
144 


64441.110
145 


64441.111
146 


64441.112
147 


64441.113
148 


64441.114
149 


64441.115
150 


64441.116
151 


64441.117
152 


64441.118
153 


64441.119
154 


64441.120
155 


64441.121
156 


64441.122
157 


64441.123
158 


64441.124
159 


64441.125
160 


64441.126
161 


64441.127
162 


64441.128
163 


64441.129
164 


64441.130
165 


64441.131
166 


64441.132
167 


64441.133
168 


64441.134
169 


64441.135
170 


64441.136
171 


64441.137
172 


64441.138
173 


64441.139
174 


64441.140
175 


64441.141
176 


64441.142
177 


64441.143
178 


64441.144
179 


64441.145
180 


64441.146
181 


64441.147
182 


64441.148
183 


64441.149
184 


64441.150
185 


64441.151
186 


64441152.eps
187 


64441.153
188 


64441.154
189 


64441.155
190 


64441.156
191 


64441.157
192 


64441.158
193 


64441.159
194 


64441.160
195 


64441.161
196 


64441.162
197 


64441.163
198 


64441.164
199 


64441.165
200 


64441.166
201 


64441.167
202 


64441.168
203 


64441.169
204 


64441.170
205 


64441.171
206 


64441.172
207 


64441.173
208 


64441.174
209 


64441.175
210 


64441.176
211 


64441.177
212 


64441.178
213 


64441.179
214 


64441.180
(215) 

COMMUNICATION

Æ 


64441181.eps