S. HRG. 109–170

NOMINATION OF MICHAEL O. LEAVITT

HEARING

BEFORE THE

COMMITTEE ON FINANCE

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

ON THE

NOMINATION OF

MICHAEL O. LEAVITT, TO BE SECRETARY, U.S. DEPARTMENT OF

HEALTH AND HUMAN SERVICES

JANUARY 19, 2005

(

Printed for the use of the Committee on Finance

NOMINATION OF MICHAEL O. LEAVITT, TO BE SECRETARY, HHS

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20–932—PDF 2005

S. HRG. 109–170

NOMINATION OF MICHAEL O. LEAVITT

HEARING

BEFORE THE

COMMITTEE ON FINANCE

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

ON THE

NOMINATION OF

MICHAEL O. LEAVITT, TO BE SECRETARY, U.S. DEPARTMENT OF

HEALTH AND HUMAN SERVICES

JANUARY 19, 2005

(

Printed for the use of the Committee on Finance

COMMITTEE ON FINANCE

CHARLES E. GRASSLEY, Iowa, Chairman

ORRIN G. HATCH, Utah

TRENT LOTT, Mississippi

OLYMPIA J. SNOWE, Maine

JON KYL, Arizona

CRAIG THOMAS, Wyoming

RICK SANTORUM, Pennsylvania

BILL FRIST, Tennessee

GORDON SMITH, Oregon

JIM BUNNING, Kentucky

MIKE CRAPO, Idaho

MAX BAUCUS, Montana

JOHN D. ROCKEFELLER IV, West Virginia

KENT CONRAD, North Dakota

JAMES M. JEFFORDS (I), Vermont

JEFF BINGAMAN, New Mexico

JOHN F. KERRY, Massachusetts

BLANCHE L. LINCOLN, Arkansas

RON WYDEN, Oregon

CHARLES E. SCHUMER, New York

KOLAN DAVIS, Staff Director and Chief Counsel

RUSSELL SULLIVAN, Democratic Staff Director

(II)

(III)

C O N T E N T S

OPENING STATEMENTS

Page

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

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

Baucus, Hon. Max, a U.S. Senator from Montana ................................................ 4

Hatch, Hon. Orrin G., a U.S. Senator from Utah ................................................. 8

CONGRESSIONAL WITNESS

Bennet, Hon. Robert, a U.S. Senator from Utah .................................................. 9

ADMINISTRATION NOMINEE

Leavitt, Hon. Michael O., nominee to be Secretary, U.S. Department of Health

and Human Services ............................................................................................ 12

ALPHABETICAL LISTING AND APPENDIX MATERIAL

Baucus, Hon. Max:

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

Bennet, Hon. Robert:

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

Bunning, Hon. Jim:

Prepared statement .......................................................................................... 59

Grassley, Hon. Charles E.:

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

Prepared statement .......................................................................................... 59

Jeffords, Hon. James M.:

Prepared statement .......................................................................................... 61

Hatch, Hon. Orrin G.:

Opening statement ........................................................................................... 8

Leavitt, Hon. Michael O.:

Testimony .......................................................................................................... 12

Prepared statement .......................................................................................... 62

Responses to questions from:

Senator Grassley ....................................................................................... 65

Senator Baucus .......................................................................................... 112

Senator Bingaman ..................................................................................... 225

Senator Bunning ....................................................................................... 235

Senator Conrad .......................................................................................... 237

Senator Crapo ............................................................................................ 238

Senator Hatch ............................................................................................ 240

Senator Jeffords ......................................................................................... 242

Senator Kyl ................................................................................................ 247

Senator Lincoln ......................................................................................... 251

Senator Rockefeller ................................................................................... 273

Senator Santorum ..................................................................................... 286

Senator Schumer ....................................................................................... 293

Senator Smith ............................................................................................ 300

Senator Snowe ........................................................................................... 304

Senator Thomas ......................................................................................... 308

Senator Wyden .......................................................................................... 312

Lincoln, Hon. Blanche:

Prepared statement .......................................................................................... 351

Page

IV

Lott, Hon. Trent:

Prepared statement .......................................................................................... 352

Smith, Hon. Gordon:

Prepared statement .......................................................................................... 352

Thomas, Hon. Craig:

Prepared statement .......................................................................................... 354

Wyden, Hon. Ron:

Prepared statement .......................................................................................... 355

COMMUNICATION

American Society of Health-System Pharmacists ................................................. 357

(1)

NOMINATION OF HON. MICHAEL O. LEAVITT,

TO BE SECRETARY, U.S. DEPARTMENT OF

HEALTH AND HUMAN SERVICES

WEDNESDAY, JANUARY 19, 2005

U.S. SENATE,

COMMITTEE ON FINANCE,

Washington, DC.

The hearing was convened, pursuant to notice, at 2:08 p.m., in

room SD–215, Dirksen Senate Office Building, Charles E. Grassley

(chairman of the committee) presiding.

Also present: Senators Hatch, Lott, Snowe, Kyl, Thomas, Smith,

Bunning, Crapo, Baucus, Rockefeller, Conrad, Bingaman, Lincoln,

and Wyden.

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

SENATOR FROM IOWA, CHAIRMAN, COMMITTEE ON FINANCE

The CHAIRMAN. This is the first meeting of this committee in the

new Congress, and we have three new members that we all know

as members, but I think they ought to be mentioned to the public

at large.

We have Senator Wyden, who is here right now as a new member. He is a Senator from Oregon. We have Senator Schumer, who

cannot be here right now. It is my understanding that he cannot

get down here right now because of travel from his home State.

But Senator Schumer of New York is a new member. Then over

here on this side, not present right now but I know he is in town

today, is Senator Crapo from Idaho. So, we welcome these three

members to the committee.

Also, obviously we want to welcome back the returning members

of this committee because this is a committee that has had a great

deal of collegiality and camaraderie, and a lot of progress that

comes from that sort of environment.

But we do have very challenging work before us on some of the

most important issues facing the country, and we look forward to

working with all of the members of these committees to work on

the agenda that is coming up shortly.

Second, our procedure today is that Senator Baucus and I are

going to make opening statements. After opening statements, we

will hear from Senator Hatch and Senator Bennett to introduce

Governor Leavitt. Then Governor Leavitt will testify before our

committee.

Following that, Senators will have 5 minutes each to ask questions. I am going to start, followed by Senator Baucus. Senator

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Baucus will then be followed by the Senators in the order of their

arrival, in addition to the people that are here, by seniority, getting

recognized in that direction.

If things can be worked out, and we do not have a quorum right

at this particular minute, and it would not matter if we did because I know we have got to go through it.

But at the end of this hearing, if we could do like some other

committees have done—and we are only going to do this if we have

the permission of Democratic members—I would like to take action

on Governor Leavitt’s nomination. So, keep that in mind. If some

of you ask questions and leave, maybe you could come back and

help us have a quorum for doing that.

Governor Leavitt, we welcome you. First, before we talk about

the issues that come before you and this committee and my statement on those, I think we ought to thank Secretary Thompson,

your predecessor, for devoted public service over the last 4 years

in the position that you are being appointed to, as well as a lifetime of public service that he had in the State of Wisconsin.

During Secretary Thompson’s tenure, he successfully led the Department through the September 11 tragedy, the flu vaccine shortage, and he also was very instrumental in the passage of the Medicare Modernization Act and has successfully completed 200 regulations on time, with 27 regulations pending publication. That is a

difficult task to do in a short period of time, to get that new legislation ready for people’s participation.

Looking back at these past events and looking forward to the

new challenges that await us, it is most fitting that we start the

first health care hearing of the 109th Congress with the nomination of you, Governor Leavitt.

During your term as governor, you have had an opportunity to

reduce the number of uninsured children through your work on the

Children’s Health Insurance Program, and significantly increased

the number of those with health insurance coverage, in my understanding, by more than 400,000.

You have improved immunization rates by at least 75 percent

and made significant improvements to the child welfare system. I

am certainly not alone in my high estimation of you as governor

of your State. The people of Utah recognized this with three consecutive terms.

I have a longer statement that I will submit for the record, but

right now I would like to concentrate on a couple of key issues.

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

The CHAIRMAN. Big challenges lie ahead for this Department and

strong leadership is needed. First and foremost, is an estimated 45

million Americans lacking basic health coverage. Each year, the

ranks of the uninsured increase.

As Secretary, your leadership will be called upon to propose innovative ways that we can help constrain costs and increase access

to health care. This is surely one of the biggest health care challenges of our time.

The Medicaid program is the key Federal program for providing

health care access to low-income individuals. It is now the largest

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Federal health care program in terms of total spending and serves

51 million people.

Yet, it was originally enacted in 1965, and many have suggested

that it has not kept up with today’s challenges. I look forward to

working with you as the new Secretary to ensure that Medicaid

and the State Children’s Health Insurance Program are functioning

as effectively as they should.

Your Department also has the important job of implementing the

new Medicare prescription drug program. Under Dr. McClellan’s

leadership, the Centers for Medicare and Medicaid Services has accomplished an impressive workload over the last year.

Dr. McClellan and his staff at CMS are to be commended for

their long hours, hard work, and dedication. This is a crucial year

for drug benefits, and I look forward to working with you as we further implement this program.

Medicare will still face significant challenges. Many have said

rising Medicare costs can be contained and health care quality improved by paying providers based on their performance and by utilizing high information technologies.

Bringing these initiatives together to reward quality and efficiency, while reducing medical errors and duplication will be one

of the major undertakings in health care over the next decade.

Strong leadership at HHS, with the cooperation of this committee,

is needed to help make that happen.

Another issue on which your leadership is needed is the importation of prescription drugs from Canada and other developed nations. We may even have some disagreement on it, but at least I

think it is a very important issue. American consumers are demanding lower prices, and I believe that legalizing importation is

one way to help do that, as long as we ensure safety.

Besides these issues, the Department faces other challenges. I

have always taken the responsibility of conducting the oversight of

the executive branch very seriously. I have, and will continue to do

so, as Chairman of the Finance Committee. Government truly is

the people’s business, and the American people have a right to

know, with more transparency in government.

In that regard, I am a firm and ardent supporter of most whistleblowers, most meaning those that are credible. Historically, whistle-blowers have been the key to uncovering waste, fraud and

abuse. Unfortunately, whistle-blowers are often as welcome as a

skunk at a picnic.

Particularly, the Food & Drug Administration has come under

increasing scrutiny on issues of drug safety. Governor Leavitt, it

will require your strong leadership to make the FDA more transparent and to restore the public trust.

Scientists working in that office are not to be muzzled and overcome by pressure placed on them by other offices at the FDA. The

American people deserve to know that their drugs are safe. A number of individuals have blown the whistle at FDA. These patriotic

Americans are scared that if they tell the truth, they will suffer retaliation at the hands of senior officials.

With that in mind, Governor Leavitt, I want your public assurance that anyone who exposes problems at your Department will

have their rights as Federal employees fully respected and will be

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permitted to speak with this committee, or any member of Congress, without fear of reprisal.

Do I have your commitment, Governor Leavitt? You understand

that I need employees at the Department to hear you, because I

know that they are listening.

Mr. LEAVITT. Senator, they will be treated with respect and dignity, and taken seriously.

The CHAIRMAN. Thank you. I look forward to addressing these

problems with you. It is my hope that the Finance Committee will

work closely with you to address some difficult issues affecting millions.

Taking a closer look at Medicaid and the CHIP programs and

their improvement, implementing a new Medicare drug benefit, importation of prescription drugs, enactment of welfare reform, and

the advancement of information technology and quality in health

care are just some of the priorities I look forward to addressing

with you, Governor Leavitt.

Let me close by thanking you for your willingness to serve as

Secretary of Health and Human Services. It is a major commitment

that requires personal sacrifice. I also thank President Bush for his

choice of you as a qualified person.

I now have the opportunity to listen to Senator Baucus, then we

will go to Senators Hatch and Bennett.

OPENING STATEMENT OF HON. MAX BAUCUS,

A U.S. SENATOR FROM MONTANA

Senator BAUCUS. Thank you very, very much, Mr. Chairman. I

think every member of this committee knows, and certainly the

new members are going to find, that you are extremely fair, extremely gracious, and this is a committee where we work together.

I welcome the new members of the committee, most of whom are

not here today. They are definitely going to find that the partnership that you and I have, Mr. Chairman, is pretty much shared by

other members of the committee. We are very proud of that, that

we work together to try to find solutions.

We are not idealogues, not partisan, but, again, we try to find

solutions. Sometimes that means digging down a little more deeply.

Sometimes it means asking a lot of questions. Sometimes it means

looking at assumptions behind different proposals.

But it is our view, and I know you share this with me, Mr.

Chairman, that it is why we are serving. It is the best service we

can provide to the people we represent, for whom we work, that is,

for our employers around the country.

I just want to tell you, as one member of the Senate, how much

I appreciate the approach that you take, because a lot of things

begin at the top. You are at the top, and your manner, your demeanor, your approach, your goodwill, and your faith all fall down

a little bit, and this is one area where I think maybe trickle-down

makes sense. So, thank you very much for what you do.

Second, I think there is a good chance that we can report out the

nomination favorably—I hope so—today. As you know, Mr. Chairman, Governor/Administrator Leavitt and I have been discussing

the last day, actually, several times, information that I have reVerDate 11-MAY-2000 16:11 Nov 08, 2005 Jkt 095484 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 20932.000 SFINANC2 PsN: SFINANC2
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quested, and the Department is working very hard to get that information to us.

We have a little bit further to go, but I think we are going to

get there. I, again, thank you, Administrator Leavitt, for your hard

work in helping to make that happen.

Mr. Chairman, we all, clearly, welcome Administrator Leavitt to

this committee, to this hearing, and to his new job. It is not going

to be an easy one, clearly, with such a huge, massive Department

that Administrator/About-To-Be-Secretary Leavitt is going to oversee.

I think he has a lot of good experience in Utah as chief executive,

with the innovative approaches he has taken to, particularly, Medicaid in Utah, which I think he is going to bring to the Department.

We thank you very much, Mr. Leavitt, for bringing that experience and that approach to your new position. You have a great reputation as a consensus builder, and this committee certainly appreciates that.

As you know, Mr. Leavitt, Medicare is one of the few responsibilities that you have, and it is huge. It covers over 40 million Americans and is at the heart of the compact that we, the government,

have made with our elderly and disabled. Also, Medicaid, the

health care safety net for nearly 50 million beneficiaries. And

TANF, which helps the neediest families among us. Of course, that

is not all.

HHS also administers day care, foster care, initiatives to reduce

drug dependency, prevent child abuse and domestic violence, and,

of course, the Indian Health Service, which, as you probably know,

has awaited authorization since 2001.

But again, as Utah’s longest-serving governor, you earned a reputation as an innovator and a consensus builder, traits that are

sorely needed as we move forward on issues before this committee,

and as a general tone in this town. I very much urge you to work

at that very hard, because it is the right thing to do. And who

knows? After a while, maybe it might be a little contagious. It

might catch on a little bit.

Just a couple of words, starting with Medicare. I played a large

role in the passage of the 2003 Medicare prescription drug bill. I

might say, I await quite anxiously the Department’s publication of

the final rule to implement major components of that law, particularly in a couple of areas.

One is the transition from Medicaid drug coverage to Medicare

for those who are eligible for both programs. Next, consumer protections to ensure access to necessary drugs. It is very important

that strong consumer protection provisions are in place.

Rules for interactions between State pharmacy plans and Medicare. Many States have State pharmacy plans, which are extremely

important, as you know. Other States do not, and that interaction

is critical.

Rules for calculating payments to States, also known as clawbacks. As a governor, you surely know a little bit about that. Rules

related to employer subsidies for retiree drug coverage, and rules

covering access for drugs to Indian populations and nursing home

residents, among others. We need to know those rules to give guidance to many stakeholders.

6

When we recently met, you drew a parallel between the implementation of the Medicare law and the stakes involved in staging

a successful Winter Olympics in Utah. You said that implementation of the bill is the Olympics of this administration. I am glad

you are taking that approach. I could not agree more.

The 2003 Medicare bill is the largest expansion of Medicare since

its enactment in 1965, and proper implementation of the new law

will, frankly, determine my level of continued support for it.

Medicaid. Medicaid now surpasses Medicare in the number of

beneficiaries enrolled and in total spending. It has come under fire

in recent years, especially from this administration, as being too

costly, too tolerant of fraud, too inflexible.

It is true that Medicaid costs are growing, but that is mostly due

to an increase in enrollment and the same health care cost inflation that affects every insurance plan. In fact, Medicaid growth is

lower, on a per capita basis, than both Medicare and the private

insurance sector.

We also hear that Medicaid is a Cadillac program compared to

the private sector. Well, you have to keep in mind that, unlike

most private insurance, Medicaid also covers long-term care.

On fraud and abuse, CMS said last week that, based on solid, reliable data, $119 million in Federal Medicaid spending was attributable to fraud in 2003. Let me just remind you, that is less than

7/100ths of a percent of total Medicaid spending. If I scored 99.93

on an exam, I would be pretty happy.

But, of course, the administration believes—and it is probably

true—that other fraud and abuse exists. But identifying calculable

fraud, so far, by CMS is limited to $119 million, a far cry from the

$20 billion cut in Medicaid that the administration proposed in its

2005 budget last year.

If forced to make cuts in Medicaid this year, we should all realize

that it is unrealistic and it is misleading to say that we are simply

cutting fraud and closing loopholes.

With respect to Medicaid reforms, my views are similar to what

yours were as governor. Namely, you opposed caps on Medicaid

spending as governor of Utah. I, too, think we should not have caps

on Medicaid spending.

Ironically, it is hard caps on Federal Medicaid spending that reduce flexibility, not increase it. This is flexibility that has allowed

a swift response to recessions, to epidemics, to disasters like 9/11,

and dramatic treatment innovations.

I also have concerns about the administration’s use of the socalled 1115 waiver authority designed to allow States to experiment and to innovate in Medicaid programs.

I am all for innovation, and I am sympathetic to States’ desire

to experiment with novel approaches to cover the uninsured. But

we must not undermine Medicaid in the process. I do not believe

that the 1115 waiver authority allows wholesale reform of Medicaid. That is not what the law provides.

The non-partisan Government Accountability Office agrees. The

GAO has identified key areas where this administration has overstepped its statutory bounds in granting waivers. So, I expect the

administration to follow the law, and that has not been happening

with respect to Medicaid waivers.

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A couple of points on TANF, which Congress has tried to reauthorize for the past 3 years and which must be extended yet again

before the end of March. I was an eager supporter of welfare reform. I remember sitting in this committee. Most of my colleagues

thought I was nuts, but I thought it was the right thing to do. I

am glad that we passed it. It has worked. We should authorize

TANF as soon as possible.

In my view, that means continuing our investments to support

working families through child care, through education, through

training, through transitional health care. We have got to support

working families. In Montana, TANF reauthorization also means

continued access and flexibility for American Indian tribes.

In Montana, we had a successful Welfare-to-Work strategy, and

we should recognize those successes in our country where they

exist. In other words, TANF reauthorization should not be about

fixing a program that ain’t broke.

Finally, I hope we can do something, work together, in a realistic

way, to address rising health care costs and the uninsured. The

United States health care system is the most expensive in the

world, by far. We learned last week that spending on health care

in the United States reached $1.7 trillion in 2003, which comes out

to $5,670 per person.

Yet, 45 million Americans lack health insurance. The next highest country, on a per capita basis, I believe, is Switzerland.

Our health care system affects the ability of U.S. companies to

compete abroad. I remember talking to the CEO of General Motors

not too long ago about how his biggest bill is his legacy costs, his

health care costs. It is not steel, it is his health care costs, which

makes it very difficult for American auto companies to compete

worldwide.

In fact, I should note here that Medicaid enrollment increased by

7.5 million between 2001 and 2003, in part because of the downturn in the economy, and in part due to losses in employer-sponsored health coverage. If not for Medicaid, the uninsured rate

would be even higher than it is today.

So what can we do about the uninsured and rising health care

costs? On the uninsured, every major poll suggests that covering

the uninsured should be at the top of the Congressional agenda.

Yet, this issue always seems to take a back seat.

So what do we do about this? I think we should do our best to

try to make some progress. Maybe not sweeping reform, but we can

address the problem incrementally, starting with areas of general

agreement.

I believe there is a consensus that we ought to start by covering

low income children better, and the poorest adults, say, below 100

percent of poverty. I hope, Mr. Administrator, that you will keep

working on this issue, and I pledge to work with you.

On health care costs—and I am about to finish here—we have to

continue to improve health quality. Americans receive appropriate,

high-quality health care services only about half the time.

An estimated 270 people die each day in America as a result of

medical errors. These numbers should shock us into action. We can

take important steps this year to improve health care quality. I

hope we can count on the administration’s support in that regard.

8

There are lots of good people working very hard at improving

quality, measuring outcomes, finding ways to reduce infection rates

in hospitals, which is a very, very costly part of health care, and

an unnecessary part of health care today.

Before I close, I want to thank you very much, Mr. Administrator, for visiting Libby, Montana. I asked you to come to Libby

a couple of times. You were very gracious and found a way to fit

it into your schedule quite quickly.

As you well know, the people of Libby really need some help and

they really appreciated your visit. That meant a lot to them, and

your visit meant a lot to me. I hope, in your capacity as Secretary,

you can come back to Montana fairly frequently.

Thank you for your service, again, not just as governor, not just

as the Administrator of EPA, not just as a political leader, but as

someone who is creative, works together, and thinks outside of the

box. You are a great asset to this country and to the administration.

The CHAIRMAN. Thank you, Senator Baucus.

Now we go to Senator Hatch, and then Senator Bennett, for their

introductory statements. Then we will go to Governor Leavitt.

Senator Hatch?

OPENING STATEMENT OF HON. ORRIN G. HATCH,

A U.S. SENATOR FROM UTAH

Senator HATCH. Thank you so much, Mr. Chairman. I personally

want to express my gratitude and thanks to Secretary Thompson

for the great work that he has done during the time that he has

served at HHS. He is a fine man. I think if he were to choose a

successor, he would have chosen Mike Leavitt. I am sure he had

some input on it anyway. The fact of the matter is, he knows Mike,

he knows what a great governor he was, and a great head of the

Governors Association as well.

So, it is my honor and privilege to introduce, along with my

friend and partner Senator Bennett, our good friend and fellow

Utahn, Governor Michael Leavitt. I have known Mike Leavitt for

a long time and have worked closely with him on many key issues,

not only Utah health issues, but national health issues as well.

We are all aware of Mike’s distinguished record. I do, however,

want to convey to you how qualified Mike Leavitt is for this job.

In short, he is bright, energetic, dedicated, and fair-minded, all of

the qualities necessary for this important and difficult job. I say,

with all respect to those who have gone before him, I can think of

no better Secretary of Health and Human Services than this man.

I think he will be a great one.

Mike has devoted much of his life to public service, first in Utah,

and more recently here in Washington. He is a smart decision

maker, a tireless worker, and a successful manager and executive.

He is fair, he is knowledgeable about health care, he is a good and

decent family man.

His wife Jackie is here today, and we are happy to see her here

today. She was not feeling well yesterday. She is a wonderful

woman who has done an awful lot herself in the State of Utah to

help all of us feel better about ourselves and to do some of the

things that should be done from a charitable standpoint. He and

9

his wife have wonderful children, five of them, that I think any of

us would be proud to associate with.

I might add that Jackie Leavitt was born and raised in a little

town called Newton, Utah. There used to be about 300 people, and

there are 500 now. That is where my wife was born and raised as

well. So, we are proud of saying that Newton, Utah is one of the

most well-represented cities in America. At least, we think so.

As governor of Utah, Mike Leavitt was a leader on issues with

which this committee is very familiar, important issues such as

welfare reform, health care delivery, and Medicaid. During a difficult financial time for our State, he was able to create a fiscally

responsible budget, and at the same time provide important services to lower income Utah citizens of all ages.

While we were, in this committee, working on the CHIP legislation in 1997, I talked with Governor Leavitt frequently to get his

perspective as a leader in the National Governors Association. He

provided me with valuable insight and has continued to do so as

the program has grown.

I would be remiss if I did not cite Governor Leavitt’s work in providing health care coverage not only to CHIP-eligible children, but

to lower income adults within our State as well through innovative

State health care insurance programs like the Primary Care Network.

On a personal note, I want the members of our committee to

know that Mike Leavitt is a fair man. He will look at all sides of

an issue before making a policy decision, and you can count on the

result to be the right result and the right decision. His record as

both the governor of Utah and the Administrator of EPA proves

this, and he will continue to be a great leader when he becomes

Secretary of HHS.

I can promise you that he will become an excellent leader for the

programs we work on daily: Medicaid, CHIP, welfare, and FQHC,

just to name a few. Importantly, we can count on Mike Leavitt,

along with CMS Administrator Mark McClellan, to work closely

with the committee on the difficult task of fully implementing the

Medicare prescription drug program next January.

Although FDA is not within this committee’s jurisdiction, I just

wanted to close with one anecdote that a senior official at FDA related to me the other day. After attending several briefings with

the Secretary-designate, the FDA official said, ‘‘At our first briefing, Governor Leavitt was good. At the second meeting, he was excellent. At the last briefing, he was teaching us.’’

I think that sums it up. That is the kind of man Governor

Leavitt is. He will be a great Secretary. So, with pride and admiration, I introduce to this committee Governor Mike Leavitt, and I

hope that this committee will help us to get him confirmed in the

job as soon as possible so that this great work can go forward.

The CHAIRMAN. Thank you, Senator Hatch.

Now, Senator Bennett.

STATEMENT OF HON. ROBERT BENNETT,

A U.S. SENATOR FROM UTAH

Senator BENNETT. Thank you very much, Mr. Chairman and

members of the committee. I appreciate the opportunity of being

10

here. You all have copies of Mike Leavitt’s resume and you know

his activities and his accomplishments. Orrin has outlined that.

Let me be personal with you for just a minute, as I did with the

other committee. I first met Mike Leavitt when we were both private citizens worrying about the quality of Utah’s schools.

The State legislature created a group to address Utah’s schools,

and I was part of that group. I looked across the room and said,

who is that very bright, very young man—by my standards, at

least, he was very young—who has all those good ideas? Someone

said, that is Mike Leavitt.

Mike, I have come to realize, has had the kind of stepping-stone

career that prepares you, one experience at a time, for high responsibility and high office. I think if you had just dropped him in, he

would have a tremendous learning curve.

But as I look back over his career, I find many parallels with my

own. He cut his teeth running his father’s political career while he

was in his 20s. I ran one of my father’s campaigns when I was 28.

The difference is, my father won and his did not.

But that had an impact on him, in that his father then took another assignment that took him out of the State, which meant that

he then, as a young man, ran his father’s business.

With his father gone, he then went from a political experience to

a managerial experience, and then decided that he wanted to put

his own name on the ballot. We became good friends at that point

because we ran together in 1992, he for governor and I for the Senate.

We share the distinction, along with Senator Hatch—this may be

a requirement for election—of having finished second in the Utah

convention, so that all three of us had to come from behind to win

the primary. But that was a growing kind of experience.

Then he served as governor, elected three times. There has been

only one other governor in the State who has had that experience.

I want to share this with the committee, as I did with the Health

Committee, because it involves your former chairman.

As we were debating welfare reform, we all remember that Pat

Moynihan was absolutely dead set against any kind of welfare reform. He took the floor saying that if we passed this welfare reform

bill, we will have a race to the bottom. Everybody will do as little

as possible.

Well, I had had conversations with Governor Leavitt about what

was happening in welfare reform in the State of Utah under the

waivers that had been granted by Secretary Shalala. She, by the

way, came out and looked at the innovative welfare reform that

was happening and said, this is what we ought to do nationwide.

Utah is the example of what we ought to be doing under the waiver. This ought to become normal policy.

So, I ventured to disagree with Chairman Moynihan on the floor

and said, I do not think welfare reform will be a race to the bottom

because I have seen what Governor Leavitt has done in Utah. We

have some innovative, creative things that are making welfare better. The focus is not on making welfare cheaper, the focus is on

making welfare better for the people who are on welfare.

11

I will never forget Senator Moynihan saying, I agree with the

Senator from Utah that it will not be a race to the bottom in Utah,

but I guarantee you it will be in New York.

But this was a tribute to the creativity of this man. He could

have stayed as the governor of Utah, probably as long as he wanted. But the President called him with a new challenge and this was

a significant step up. I remember talking to him about what it was

like to go from governor of Utah to Administrator of EPA. He said

it is a very steep learning curve. Possibly, if he had been made Secretary of HHS straight from the governor’s chair, he would not be

as qualified as he is. But he has now had a year of dealing with

a major Federal bureaucracy, the culture of which is entirely different than dealing with a State bureaucracy in a relatively small

State.

So, I ask you to recognize that he has had a series of steps, from

his first political experience, to his business experience, to his electoral experience as a candidate, then his experience as governor.

By the way, he was chairman of the Republican Governors Conference, chairman of the Western Governors Conference, and chairman of the National Governors Association, so he moved up there,

then a year of experience with the Federal bureaucracy. I do not

think there is anyone who comes to this with better training or better preparation.

But, as Orrin has said, just as important as that training and

preparation is the character of the man. On that score, I have absolutely no doubt in recommending him to this committee with

wholehearted support for this nomination and urge that we do everything we can in the Senate to get him on the job as quickly as

possible.

The CHAIRMAN. Thank you, Senator Bennett.

Now we go to the statement by Governor Leavitt. I would suggest that you do not have to ask, if you have a long statement you

want put in the record. I will be put in the record. We always ask

people to summarize.

Before you give your statement, I have the names of family members of yours in front of me, but I sometimes leave people out. So

would you please introduce any family and friends and ask them

to stand, please?

Mr. LEAVITT. Thank you, Senator. I am delighted to. My wife,

Jackie, is with me. Jackie is here with her mother. I might add,

Senator, you responded about the progress we have made in immunizations.

There is no person on the planet more responsible for that than

my wife, who worked very hard to increase. We were last, and she

brought us near to the top during the 10 years that we were together. It was a personal campaign of hers and she deserves that

credit.

My parents are here, my mother, Ann, and my father, Dixie. I

have three of my five children that are with us as well, and their

spouses. I will ask them to stand: Mike, Ann Marie, Taylor, and

Tammy, our daughter-in-law. My son Westin is in Kiev, Ukraine

with another brother, having quite an experience in that political

system right now. Then I have a son, Chase, who is doing mission

for our church in British Columbia for a couple of years. I do not

12

think I left anyone out. I could be guilty of the same thing you

were concerned about.

The CHAIRMAN. You bet. Now, your statement.

STATEMENT OF HON. MICHAEL O. LEAVITT, NOMINATED TO

BE SECRETARY, U.S. DEPARTMENT OF HEALTH AND HUMAN

SERVICES

Mr. LEAVITT. Senator, thank you for the invitation just to summarize my statement. I will do so. I do want to express the most

profound feeling I have today, and that is one of gratitude for the

opportunity to have been nominated by the President, the sense of

confidence that that provides.

I would like to express appreciation to the chairman, Senator

Baucus, and the Finance Committee staff. They have been extraordinary in being able to help collect the information and do it in an

efficient way.

I want to join all of you in expressing admiration for Tommy

Thompson. I have enormous respect for Tommy Thompson. As has

been indicated, we were friends as governors for many years.

We worked together, along with this committee, while we were

governors on many of the same issues that we will be talking about

today. He is revered by the people at HHS, for good reason. I

pledge to him and to you that I will build on the legacy that he

created during his service.

I would like to just tell you a couple of things, in summary, that

I believe. I want you to know, I believe that public service is, in

fact, a trust. Perhaps the most important thing I can tell you today

is I will conduct myself with fidelity with respect to that trust.

I also want to acknowledge the fact that I believe, and feel deeply, a sense of responsibility that we all have in our society to care

for the truly needy. As we do so, I believe we need to foster an

ethic of self-reliance in our society, because self-reliance is a prerequisite of freedom and prosperity.

I view HHS to be, as you have said, a Department that touches

the lives of every American, and many around the world. Every day

when families come together and partake of a meal together, they

do so knowing that the food they will eat has been inspected and

safe.

In the middle of the night when we get up to administer some

medicine to our young daughter or son, we do so with a sense of

confidence and trust. We, among all the nations of the world, can

know that that which we give them will be for their good.

It is clear to me that this Department has a profound impact on

health care, both at the policy level and directly in the lives of millions of Americans. I personally have experienced, as governor, the

responsibility of administering our highest and most noble aspirations as a society in helping with the welfare system and with the

health care system.

I am also aware of what an important role HHS now plays in our

newest challenge as a country, and that is homeland security.

Just a couple of views on what I see as being priorities. They

match very closely with those that you have mentioned. Medicare.

Successful implementation of the Medicare Modernization Act will

be the main event at HHS during 2005. The expectations are very

13

high. The time frames are short. There will inevitably be flaws, but

we will not fail.

I would like, as well, to add my enthusiasm for working with this

committee on the reauthorization of TANF and the Welfare Reform

Act that we worked on together some 6 years ago. I believe it is

a great American success story and one that we need to build on.

We can refine, and build, and improve, but we do need to move forward with reauthorization.

Medicaid. Medicaid is a vital program, but it is not meeting its

potential to do good in the lives of this Nation’s poor. We can, in

fact, use those resources more wisely. I believe we can use those

resources to expand access to the truly needy in this country so as

to begin to move away from the large number of our citizens and

colleagues who have no health care.

I would like to mention the FDA, the CDC, and NIH. Those are

three names of trust in this country. They are brands. A brand is

a promise. In the middle of the night when we get up to administer

medicine to our child or to take it ourselves, we do so knowing that

we are administering something we can count on. We cannot allow

those American treasures to be lost. Protecting their integrity, I believe, is a vital and important part of this job.

Several of you have mentioned in our visits the importance of the

health care discussion that we are now engaged in. Senator Baucus

mentioned the fact that we are now approaching 15 percent of the

Gross National Product of this country being allocated to health

care.

This is no longer just a health care issue, it is an economic issue.

It is about being able to assure that we maintain competitiveness

in the world and care for the needs of our citizens.

I believe we are moving toward what I would characterize as a

large-scale discussion on the health care system in this country,

and I welcome the discussion. It needs to be rigorous. We cannot

be timid. We need to be bold and transformational.

I would also comment on the relationship of the United States

to the rest of the world, and pledge that, if I am confirmed, I will

work to make the United States an influential humanitarian voice

in the world.

When I started my public service, Mr. Chairman, I pledged to the

people of Utah, and I would pledge to all of you, three basic personal goals.

First, perhaps consistent with my western roots, is to leave it a

better place than I found it, to plant seeds that will be there for

a future generation in full harvest, and then to give it every ounce

of my energy. That is my commitment, and has been through my

public service.

Mr. Chairman, I look forward to working with you and other

members of the committee, and I now look forward to receiving

your questions and doing my best to respond.

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

The CHAIRMAN. I thank you for your statement and your commitment to public service, and the promise that you made to the people of Utah that you have repeated here for the people of this country, and for your hard work.

We start out with three questions that we ask everybody.

14

The first is whether or not there is 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?

Mr. LEAVITT. No.

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

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

have been nominated?

Mr. LEAVITT. I know of none.

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

duly constituted committee of Congress, if confirmed?

Mr. LEAVITT. I do.

The CHAIRMAN. Thank you.

Mr. LEAVITT. Senator, I should make mention of the fact that, in

the materials that I have submitted to the committee, I reflected

certain of my personal assets that potentially could. I am now

working with the Office of Government Ethics to resolve those, and

have made commitments to do what is necessary to assure that

those are cleared.

The CHAIRMAN. All right. Thank you very much for your transparency.

At this point we will start our 5-minute rounds of questioning.

I would ask, at least on the first round, that members stay within

the 5-minute period of time, meaning if you ask your question

within the 5-minute period of time, the governor’s answer on the

6th, 7th or 8th minute does not count against you.

We have got plenty of time here this afternoon, so if people need

more time to ask questions, we will get that job done. But at least

for those that just want one round, we will not be infringing upon

other people’s freedom.

So, would you start the 5 minutes, please?

As you know, in 2002, Secretary Thompson approved a waiver

that allowed Utah to extend Medicaid coverage to 25,000 uninsured

adults, while reducing benefits to existing adult Medicaid recipients. The Utah waiver is relevant, because your experience as governor will no doubt guide you as Secretary.

In addition, Congress and this committee will be taking a closer

look at Medicaid to see if we can make improvements. It is going

to take some creative leadership to slow the growth of Medicaid

spending.

You have testified before this committee that you opposed caps

on Federal Medicaid spending in any form because it shifts costs

to State and local governments that they cannot afford. That would

be March 11, 1997 testimony before this committee.

You also stated that the cost shift that would result from a unilateral Federal cap would force States to choose between cutting

back on payment rates to providers, eliminating optional benefits,

ending coverage of optional beneficiaries, or coming up with additional State funds to absorb the cost, the same reference.

Question. As we look ahead to the challenges that we must face

with the Medicaid program, would you please discuss your vision

for improving Medicaid, and also your vision for SCHIP? And

would you also discuss what role you believe private insurance covVerDate 11-MAY-2000 16:11 Nov 08, 2005 Jkt 095484 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 20932.000 SFINANC2 PsN: SFINANC2
15

erage should play in providing health care coverage to lower income individuals and families?

Mr. LEAVITT. Senator, let me speak directly, that I believe—as I

did then—that mandatory populations should remain mandatory

and that optional coverages and groups should remain optional. My

view has not changed on that matter.

With respect to the waiver that you alluded to, first, let me indicate that the waiver was not intended to show the way of any

large-scale, national approach. It was designed to solve a problem

that I uniquely felt as governor.

Here was the problem. I had 400,000 of my fellow Utahns who

had no health insurance. In Utah, if you desire to have the richest

health insurance benefit plan in the State, you will go on Medicare.

If you choose to have the second richest health insurance benefit,

you will go on Medicaid.

If you are on Medicaid in my State—I do not know what it is in

other States—you are somewhere between 35 and 40 percent richer

in benefits than you would be if you were on a plan in the private

sector. So we made the decision to try an experiment.

With the acquiescence and support of HHS, we looked at some

optional groups and made some modifications in the benefits, took

the savings, and created a small, for lack of a better term, HMO

out of our Primary Care Network.

We created a small policy that, in essence, provided basic care

benefits and provided basic preventative health care to roughly

18,000 people in our State who had no coverage. We, in essence,

were able to use the money we had to extend benefits to a very significant population of people who had none.

Now, at the same time, we made clear, and I made clear, that

I do not see that benefit package as being what I would aspire to

have the average Utahn provided. We went to the hospital community in our State and said to them, will you help us provide more

than just preventative care? Our hospitals committed nearly $10

million to provide extended care and specialists to this population.

I would suggest, it has been a very successful experiment, one

that I have learned from and that I believe others could learn from.

Is it perfect? No. But we have provided health care to 18,000 people who had none.

The CHAIRMAN. Do you still oppose caps on Medicaid programs

in any form?

Mr. LEAVITT. Mandatory populations should remain mandatory.

Optional coverages should remain optional. Optional groups should

remain optional. That was the position I had when I made the

statements you referenced, and that is the position I have today.

The CHAIRMAN. What tools can the Federal Government give to

the States so they can better manage spending while providing access to quality health care?

Mr. LEAVITT. Senator, greater flexibility. I firmly believe that

States, given the tools to manage health care, cannot just improve

the quality of the delivery, but they can also expand basic quality

health care to more of our citizens.

You asked about SCHIP. That is another example of where I believe we use some ingenuity and innovation to provide high-quality

health care to our citizens. SCHIP includes a provision under

16

which States can provide or create a program of their own as opposed to adopting Medicaid.

We opted to that provision. We concluded that we would provide

our children essentially the same coverage that my children have,

or had, as governor. Instead of adopting Medicaid, we opted to put

them into the program, and we were able to cover 35 percent more

children.

Now, granted, it was not the same coverage as Medicaid. It was

the same coverage that the governor’s children had. I am not suggesting that that is perfect, but 7,000 children who had coverage

who otherwise would not have, in my view, was a success.

The CHAIRMAN. Thank you very much.

Now, in this order: Senator Baucus, then Senators Hatch, Rockefeller, Snowe, Conrad, Thomas, Bingaman, Smith, Wyden, Kyl, Lincoln, and Bunning. If some of you feel that you were not seen at

the right time, take it up with the administrative staff, because you

will not make me mad if it is wrong. Just, do not sulk away.

Senator Baucus?

Senator BAUCUS. Thank you, Mr. Chairman.

Mr. Leavitt, you and I have had several discussions lately with

respect to information and data from HHS. As you know, I have

a concern on the drug bill. That is, how is the $1 billion that Congress has allocated to the implementation of the drug benefit being

spent? That is a lot of money.

Frankly, I would like to see the drug benefit work. I know there

has been a lot of controversy around it. You did give me some data,

albeit pretty sketchy, which, to be honest, leads me to conclude

that not nearly as much hard thinking has gone into how to spend

that $1 billion effectively as there should be. I would like you to

comment on that.

I have another couple of questions during my 5 minutes, if you

could comment on all three questions at once.

The others are in respect to the administration’s policy with respect to inter-governmental transfers. As you know as a former

governor, States are very ingenious in finding ways to ramp up

their State match in order to get more Federal money, and then

they take the money out of the State match and it goes back to

where they got it in the first place. We have had problems with

upper payment limits, and Congress has tried to address that.

I would like to know the Department’s position, not only its policy with respect to inter-governmental transfers, but I would like

to know whether the Department is going to issue rules or general

guidance as to what is a proper transfer and what is not a proper

transfer, not on an ad hoc basis, but just so we all know what the

rules are. And if not, why not.

The same is somewhat true with respect—and you have given me

a lot of this information—to the drug discount cards. That is, what

is the State-by-State experience? How many people are enrolled in

these drug discount cards on a per-State basis?

You have given us information, as I requested, for the States represented by members of this committee, but have not thus far with

respect to other States, although you have given us some

unscrubbed data with respect to other States.

17

I frankly would expect that data to be given to us very quickly.

I understand that data will be scrubbed and given to us sometime

next week, I would hope. The earlier the better.

If you could just comment on those three points. Actually, I will

give you a fourth question to address while you are thinking about

the other three. Again, with respect to Medicaid.

If you could tell us, you have said already that you oppose per

capita spending caps for mandatory spending. The question is, do

you oppose or not oppose per capita spending caps for optional populations? Those are the four questions.

Mr. LEAVITT. With respect to the first on Medicare and the $1

billion, you referenced our conversation about Medicare. For the

others, I will say that, shortly after the time I became governor, we

were successful in obtaining the Olympics.

I knew at that point I had 7 years to prepare and to do it well.

I also knew that it probably did not matter a lot what else happened in the next 7 years, if we did not do that well, that would

long be remembered.

I feel the same way about the Medicare roll-out. I know that it

has high expectations, that we need to invest that $1 billion well,

that we need to assure that seniors, particularly the Medicaid population, transfer efficiently.

What I can give you is my certainty that I will personally become

involved in that. I want it to do well. I think the legacy of this committee, the legislation, the President, all of that is important. That

is an important element of it.

Second, with respect to inter-governmental transfers on Medicaid, this partnership has to be one of certainty and integrity. In

the next 10 years, we will spend $5 trillion on Medicaid. I have a

hard time even contemplating that number.

We need to have what I believe will be an awkward and somewhat sensitive conversation with some of our State partners. Most

of the States, I believe, are dealing with it in a straightforward

way. Some are using transfer techniques that will likely need to be

reviewed, and I commit to do that.

Senator BAUCUS. I think it would be helpful if there were some

definite guidelines, some rules, a comment period, so it is not ad

hoc.

Mr. LEAVITT. I agree with that. We need certainty and we need

real commitments with real dollars.

Senator BAUCUS. Thank you.

Mr. LEAVITT. Third, with respect to the numbers on the cards per

State. We are committed to do that. My influence at HHS is only

informal right now.

Senator BAUCUS. Oh, it is pretty strong right now. [Laughter.] I

think you have a lot of influence.

Mr. LEAVITT. I am hoping it will grow today.

Senator BAUCUS. Oh, you have got the juice. You are there.

Mr. LEAVITT. We are committed that, by mid-week, those numbers will be scrubbed and to you.

With respect to Medicaid and the populations, my position is as

it has been. Optional coverages optional, mandatory, mandatory.

There are currently in the Medicaid program——

18

Senator BAUCUS. Should there be caps on optional? That is my

question.

Mr. LEAVITT. Senator, I do not see changes at this point, in that

I do not know what the administration is thinking, in precision. I

do know that there are limits now.

Senator BAUCUS. I am asking you your view. You are the Secretary. You are the one before us today.

Mr. LEAVITT. Well, my view is that mandatories remain mandatory, optionals, optional. I believe that, within the context of that,

we can manage what we have better. We can, in fact, expand access, and at the same time we become more efficient.

Senator BAUCUS. We have got to help people who need help,

frankly, and that is what this comes down to.

Mr. LEAVITT. The waiver that we talked about earlier, where I

was able to take an existing amount of money and expand it to

18,000 people. Frankly, Senator, that is based on a long-held belief

I have that this society needs to provide high-quality basic health

care to its needy and that we are better to have all who have highquality basic health care than a few who have a benefit package

that is unmatched by anyone else in society. What I am looking for

is a way to expand access of basic quality health care to more people, and I believe we can do that. I think we can do it more efficiently.

Senator BAUCUS. Well, my time is up. I would like you to also

look at other ways, frankly, from an administrative way, to expand

Medicaid, expand CHIP, and various ways to get more people covered.

Mr. LEAVITT. I believe it will be a function of many different approaches. This is not something for which there is a simple mold.

Senator BAUCUS. Right. And some have talked about tax credits.

I am open to it all, but we have got to chip away at it. No pun intended. Thank you.

The CHAIRMAN. Thank you, Senator Baucus.

Now, Senator Hatch.

Senator HATCH. Well, thank you, Mr. Chairman. I just want to

compliment you again. Governor Leavitt, we are so grateful to have

you in this position, and I know you are going to do a great job.

I do not know of anybody who loves policy more than Mike

Leavitt does. He works at it, and works at it, and works at it. I

think you will all enjoy working with him, as I have in the past.

Let me just say one thing. There are a lot of things I would like

to say, but let me just say one other thing. While the Medicare

Modernization Act increased Medicare reimbursement for physicians in 2004 and 2005, unless action is taken this year, physicians

who participate in the Medicare program will see serious reimbursement reductions in Medicare payments next year. In fact, doctors will face significant Medicare payment reductions that, by

2013, will total 31 percent and will threaten Medicare beneficiaries’

access to care.

You and I both know John Nelson, who is president of the American Medical Association and, of course, is an OB/GYN in our home

State of Utah. But he raises this standard with me every time I

meet with him. I agree with him that something needs to be done.

19

We in Congress, and many of us on the Senate Finance Committee, have made this matter a high priority, and we appreciate

working with you on resolving this issue once and for all. So, you

might keep that in mind.

On the CHIP bill, as you know, I am the author of the CHIP program. You were governor of Utah at the time. We spoke many

times about how this could better be done, and I think in the end

we got it right, to the extent that this body can get anything right.

So, I want you to keep watching over that, because I think that has

done a remarkable job of helping our children.

Mr. Chairman, I have to go to the Treasury Department because

a former staffer of mine is being sworn in as Treasurer of the

United States. I am going to try and get back as soon as I can. If

I do not get back, I want you to vote me for Governor Leavitt. But

I intend to be back in time to vote. So, forgive me for having to

leave.

And, Governor Leavitt, if you will forgive me for having to leave.

I know the people on this committee are going to treat you very

well, and I would expect nothing less. So, we are grateful to see

good people like you in government, and good wives like you have

who stand behind you and back you up in the way that you are

going to have to be backed up, because this is an all time-consuming job. Jackie, you might as well know, this is an 18-hour a

day job. Even then, you cannot do it all. But if anybody can, you

can.

Mr. LEAVITT. Thank you, Senator.

Senator HATCH. So we will help you up here. You have a wonderful committee here. These are really good people, and we do work

in a bipartisan way, in most ways. Hopefully, we can do a lot to

help you in this job, and I will be doing everything I possibly can

to help you.

Mr. LEAVITT. I look forward to working with you.

Senator HATCH. Thank you. We appreciate your willingness to

serve.

Thanks, Mr. Chairman.

The CHAIRMAN. Thank you, Senator Hatch.

Now, Senator Rockefeller?

Senator ROCKEFELLER. Thank you, Mr. Chairman.

Governor, we certainly do welcome you. There is an interesting

discussion already, and I think Blanche will agree with me, that

there is a little problem developing here with respect to supporting

the mandate of Medicaid, but then when you get into something

like the CHIP program or some other population, pregnant women,

children, all different kinds of populations, that it becomes, in fact,

optional, in your view.

You started out by saying, in 1997, as governor, you were against

all of this. Then in 2002, you said, well, you supported a cap on

Medicaid spending. I do not know if you elaborated at that time,

but that is a change. Now, we all understand, you were not in

health care at that point.

I spent all morning at the Defense Intelligence Agency. Everybody in this country thinks the Defense Department, with a worldwide obligation, has the biggest budget. You have, by far, the biggest budget in the Federal Government.

20

So the question of how you treat Medicaid and some of the programs underneath it—for example, what are we going to do with

the capped funding question? You capped funding in Medicaid. As

Orrin Hatch began to talk about, you affect doctors and hospitals,

long-term care, nursing home facilities. You have these enormous

events.

It is very easy for us in Washington to throw out, kind of, views

of life, I favor this. But then when it comes down to the States,

what, in effect, I think you are saying, is that even though Medicaid is 10 percent cheaper, 8 percent cheaper than private plans,

it is almost 4 percent cheaper than Medicare over the last 4 years,

according to CBO.

It will have a cap where it affects optional programs or populations. Therefore, what you are saying, is we must be creative,

which is a good statement. Nobody can argue with that. But the

bottom line is, it will be up to the States.

Now, I come from a State called West Virginia, which is neither

as large, nor nearly as prosperous, as the State of Utah. We are

struggling mightily to make the CHIP program work and to cover

Medicaid. It is by far the largest expense, most rapidly growing expense, in the State.

I cannot settle, from my point of view, if it is an optional population or an optional program; no, we will figure out a way to do

it, which means basically the States will have to pay for it. Our

State cannot. They will simply drop population. You have got 7,000

more kids covered. That will not work in our State. They will lose

coverage.

So I really want you to explain a little bit more in depth to me

the tricky relationship between, I do not support a cap on Medicaid, but we have got to figure out how to create other ways of

doing things for optional populations and optional groups.

Mr. LEAVITT. I would be happy to respond to that. Senator, my

experience, when I became governor in 1993, is we engaged in a

State-wide, rather rigorous discussion of the whole topic of health

care, generally, and developed a comprehensive approach to health

care and providing access that we incrementally wanted to move

over a 10-year period to enhance that access.

I had the great privilege, the rare privilege, of being able to work

on what we called our Health Print from the first day until the last

day, virtually a decade, and we made serious progress.

Some of that progress came because there were optional groups

and optional benefits that we were able to add at various times as

we had the capacity to do so. We opted into the program early on,

before I was governor, with basic, mandatory coverages and basic,

mandatory groups.

Then, as we had the capacity, we added the optional benefits. We

added the blind, the aged and the disabled. We added certain benefits, vision and dental plans, to various groups as we had the capacity.

Now, in the year 2002, our State was under severe economic distress, as were many other States, I trust West Virginia being one

of them. In order to balance our budget, in order to be able to continue to provide education to our children, we made a decision on

a small group of optional groups to reduce one of the optional proVerDate 11-MAY-2000 16:11 Nov 08, 2005 Jkt 095484 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 20932.000 SFINANC2 PsN: SFINANC2
21

grams. It was a management tool we had to use in order to make

our budget balance. To me, that was an unhappy moment.

I might add, it was the same year that we then chose with another group to take a dollar of co-pay more, to put some limits on

one other, and to expand coverage to 18,000 people.

When I talk about this, I am looking for the flexibility that a

manager of health care delivery has in any other circumstance.

When I talk about flexibility and the ability to manage the options,

that is what I am talking about. I am talking about being able to

take the resources we have available to us in States and deploy

them in a way that will expand access to the most significant group

of our citizens.

Now, I will acknowledge the fact that, right now, Medicaid does

not provide that. I believe Medicaid is not efficient. I do not think

it is meeting its potential to serve the poor. We are not looking to

take those dollars and deploy them into highways. We are not talking about being able to take those dollars and deploy them into

education.

Senator ROCKEFELLER. But it is more efficient than Medicare. It

is more efficient, by far, than private plans. I just question whether

what you did in Utah sort of says, well, then we can do this in

America. I would suggest to you, in Appalachia and a lot of other

areas of our country, New Mexico and others, there is a very, very

different situation.

I would urgently hope that you would think about this matter

now that you really have the entire country’s populations—pregnant women, children, different groups—very much at your mercy,

or at your help. As you said, you want to leave the world a better

place.

Mr. LEAVITT. Senator, I can tell from our brief exchange here

that there is the makings of a very good policy discussion between

us. I would like very much to have that. I think the goal here is

very clear: let us provide basic, quality health care to the largest

number possible. What I seek are the tools necessary to do that,

to accomplish it, and I hope we can work together to accomplish

that very, what I think noble, task.

Senator ROCKEFELLER. So do I. Thank you.

The CHAIRMAN. The next person is Senator Conrad. No, I am

sorry, it is Senator Snowe.

Senator SNOWE. Thank you, Mr. Chairman.

I want to welcome you, Governor Leavitt, to this committee, and

your wife Jackie, and your entire family. We certainly want to wish

you well in your endeavors, because I certainly believe that you are

uniquely qualified to lead this Department, certainly with the

depth and breadth of your experience previously as governor, understanding many of the problems that governors are confronting

in balancing their budgets and meeting constraints and mandates

from the Federal level, as well as your experience currently as Administrator of the EPA.

The Department that you have been nominated to lead certainly

has challenges that are immense, as well as complex. I think one

of the greatest challenges we are obviously going to face, and I

think you recognized that in your statement, was the implementation of the first-ever National Prescription Drug Benefit program.

22

One of the associated challenges with that program is ensuring

that there is affordability of prescription drugs, because frankly, in

the final analysis, if we cannot address the issue of costs of prescription drugs, it is going to negate the value of the overall benefit.

I know that you said yesterday, in response to questions about

whether or not you will be able to keep the costs within the $400

billion, which was the original price tag, obviously, for the prescription drug benefit, you said that is your practice as a manager, to

act within your budget.

Well, you will need those managerial tools and talents to contain

those costs without question. That is why it is so difficult to understand why there has been such resistance to the notion of drug importation, as well as bargaining authority.

To start with bargaining authority, my colleague Senator Wyden

and I have introduced legislation in the past. We plan to re-introduce it shortly to give you the authority to be able to negotiate

prices.

Currently, the Department of Defense and VA have more authority to negotiate prices, Blue Cross/Blue Shield has more authority

to negotiate prices, but the Secretary of Health and Human Services does not, even in spite of the fact that CBO has indicated that

there will be cost savings, particularly with sole-source drugs because there are no equivalent competitors; that DoD and VA have

already demonstrated that there are savings. So, clearly, we need

to be able to give this tool to the Secretary.

So, I would like to get your response to that question. In fact,

Secretary Thompson indicated that he wished he had had the opportunity to have this prerogative as well. And certainly that is

going to be central to helping the benefit to be implemented by controlling the cost of prescription drugs, which is now increasing at

two and three times the rate of inflation.

Drugs, if they are not affordable, cannot be effective. In my

State, just recently three individuals were hospitalized because

they could not afford medications. So, I think that the Federal Government needs to use every tool available to negotiate lower prices

and to be in a position to leverage lower prices.

Mr. LEAVITT. Senator, with respect to the issues on re-importation, which I believe is, in large measure, an economic concern, but

it is also a safety concern. I think I have indicated, and I am sure

there is agreement, that if in fact they can be done safely, then it

is a discussion we should be having.

With respect to the Secretary having the capacity to negotiate,

I know very little about that issue, so I am going mostly from instinct here. My instinct tells me that it is an open and rigorous

market that ultimately produces the best outcome, and that the negotiation in a marketplace takes place between those who use or

distribute and those who manufacture.

There are times in which the national government sits in that

place and should play that role. There are other times when we do

not, and we should be quite cautious as to not become the setter

of prices as opposed to a player in a market. To the extent that we

could accomplish that, I believe those are the parameters.

23

Senator SNOWE. Well, I appreciate that. I hope we can have that

conversation regarding that authority because I do think it is very

critical to this entire debate. I think drug safety and affordability

are not mutually exclusive issues.

It is further disappointing and disturbing that we have not been

able to implement the importation law that has been passed three

times now in two different administrations. Recently, Senator Dorgan and I, in the last Congress, introduced legislation to systematically address many of the concerns of the recent Health and

Human Services Task Force.

All eight concerns have been addressed in our legislation regarding safety and reliability. We hope to reintroduce that legislation

again, incorporating other views as well from among our colleagues.

But, again, it is hard to understand the resistance and the intransigence of this single question. In fact, the cover letter by the

previous Secretary to this report indicated that we could adopt

wholesale high-volume importation from Canada only, which places

greater pressure on Canada.

Our legislation does not rely on Canada only, so it does not place

inordinate pressure on them to provide or supply to the more than

2 million Americans who import drugs, but also allows imports

from 19 other countries with whom we share equivalent safety

standards. We have asked some of those countries for flu vaccine.

So, it clearly does not make sense as to why we cannot adopt this

legislation that addresses the safety questions, the reliability questions, and give people what they deserve, which is a much more affordable prescription drug that they, heretofore, cannot support financially.

Mr. LEAVITT. I had a fruitful conversation with Senator Wyden

earlier today, where he indicated that he would be active on this,

along with you. It is an issue, frankly, that I am anxious to learn

more about.

I have read conflicting views on the economic impact of reimportation. I do not know how to interpret that. The safety concerns, very clearly, would be squarely on my desk if I were to be

confirmed as Secretary, so I need to dig deeply into that. I look forward to that discussion with Senator Wyden, and also with you,

and understanding better what the economic impacts, in particular,

are.

The CHAIRMAN. Now, Senator Conrad.

Senator CONRAD. Thank you, Mr. Chairman.

Welcome, Governor. It is good to have you here. I also want to

welcome Senator Wyden to the committee. He is a very good addition to the Finance Committee and we are delighted that you are

here, Senator Wyden.

And, Governor, we are delighted that you have been nominated

by the President for this position. As I told you privately, I have

high regard for you. I have watched your career. I remember the

first time I was ever exposed to you. You were on ‘‘Meet the Press,’’

or ‘‘Face the Nation,’’ or one of those programs.

I thought you really stood out as somebody who is rational and

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firmed that judgment. So, I look forward to supporting your nomination.

Mr. LEAVITT. Thank you very much, Senator.

Senator CONRAD. And I thought you did a very good job. I know

there are differences. In my interactions with you at the agency

that you have headed, I have found you very responsive and reasonable, and that is important in these positions.

With respect to Medicare, we have a lot of discussion going on

in the city and around the country on the need for Social Security

reform. Indeed, we do have a challenge, long-term, with Social Security.

The truth is, we have an even bigger challenge with Medicare.

You and I discussed this the other day. It is really a much bigger

long-term problem. I think the sooner we get about addressing

that, the better.

I think one of the things that strikes me as a big opportunity,

is 5 percent of Medicare beneficiaries use 50 percent of the budget.

Five percent use 50 percent. If we look at those chronically ill, we

have a lot of opportunity here to focus on them, to provide better

health care outcomes, and to reduce cost.

One of the things we have learned is, if we have a case manager,

a nurse or somebody else in the health care profession, follow those

cases, we can dramatically reduce the number of prescriptions they

are taking, because many of them are inappropriate, and leading

to hospitalization. So, this is a big opportunity for us, and I think

we need to focus on it.

In the prescription drug bill that passed, there are a number of

provisions that are included. I authored a number of amendments

that were passed on the Senate side that, unfortunately, were not

fully included at the end, but some of them were, and I hope that

we pursue those actively and aggressively.

I wanted to ask you specifically about the estimates on the prescription drug bill. We were told at the time the legislation passed

that it would cost roughly $400 billion, a shade above $400 billion.

Then we found out there were internal estimates that the bill

would cost over $500 billion. I think they settled on about $534 billion.

It has disturbed me ever since, as Ranking Member on the Budget Committee, that if we were misled, that is a very serious matter.

In fact, I believe we were misled. I believed those estimates.

I could not have written a budget with a $530 billion cost. I could

write one with a $400 billion cost that I thought was responsible.

I could not write one at $534 billion. Frankly, it would have

changed my vote had the information been available to us.

I would, first of all, like to know your assessment of what happened and to get a commitment from you that this would never

happen again, that the full information that is available to you as

the Secretary would be available to members of Congress who have

to vote on legislation.

Mr. LEAVITT. Senator, you raised three topics. I will comment on

each of them. You mentioned, in passing, my time at the Environmental Protection Agency. May I just tell you that I hope, and have

confidence, that the Agency is better off because I spent time there.

25

But I want you to know that I am better off because I spent time

there. I was exposed to some of the most remarkable professionals

I have ever worked with who cared deeply about their subject matter and who work hard to do it, and I have been appreciative of

that opportunity.

With respect to Medicare and the long-term commitments that

we are making, perhaps I can best reflect by just a brief story.

Jackie and I, each year while I was serving as governor, would

invite the centenarians to visit the governor’s mansion. Anyone

who had achieved 100 years of age or more would come. It was a

grand event every year. They would come with their families, and

we would have brunch and tell stories and laugh. Every year, there

were great things that came from it.

But the last year we had the privilege of doing that, a man from

the Aging Division of the State stood and said, this year we invited

138 people from the State who have achieved 100 years of age.

Today in a hospital not far from here, a little girl will be born

who will have a 50 percent change of being invited to this gathering 100 years from now. We will invite 10,000 people to the centenarian brunch 100 years from now.

Every one of those will ultimately be part of the trust we have

on Medicare, and it gave me a solemn and rather sobering view of

that challenge.

With respect to the estimates, may I say I have little I can add

to this conversation. I was not part of it. But I can add this, that

I believe the best public policy is that which is informed by facts.

You have my commitment to do my best in being able to provide

facts when I have them, and when I do not, to tell you I do not.

Senator CONRAD. I appreciate that.

Might I ask one question in conclusion, Mr. Chairman?

The CHAIRMAN. I hope it is a short one.

Senator CONRAD. Very short.

That is on the question of Medicare reimbursement for rural hospitals. You as a governor recognized this inequity. We have faced,

before the last legislation that was passed, an enormous inequity.

A hospital in my State would get one-half as much to treat a pneumonia victim as a hospital in New York, $4,200 in North Dakota

to treat that patient, $8,500 in New York.

I authored a series of provisions, along with other members of

this committee, that are in the legislation that has passed that

begin to level the playing field. But they expire in 2006 and 2007.

I would like very much to get your commitment that you will

help us work on extending those provisions to increase the fairness

of Medicare reimbursement to these rural institutions.

Mr. LEAVITT. It has become evident to me, from my conversations

with you and other members of this committee, that our greatest

level of statesmanship will be required on this issue.

There is a lot of challenge, and I know that, as a person who has

been governor in a State that had a concentrated urban area and,

as well, rural areas. I have heard from almost all of you about this

issue, and I will do my best.

Senator CONRAD. I thank the Chair.

The CHAIRMAN. Thank you.

26

Now it is Senator Bingaman, and after Senator Bingaman, Senators Smith, Wyden, Kyl, Lincoln, Bunning, Crapo, and Lott.

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

Governor, welcome. I look forward to working with you in this

new position. I am sure you will be confirmed with a very strong

vote, and I will be joining in that.

You do make one statement in your prepared statement to the

committee today that caught my eye. You say, under the section on

Medicaid, that ‘‘Medicaid is flawed and inefficient.’’

I just wanted to hand you a copy of some sheets there that I

wanted to be sure that we were in agreement on. This first sheet

talks about average spending growth per capita between 2000 and

2004. If you look at employer private sector, the average spending

growth per capita is 12.6 percent. Under Medicare, it is 7.1. Under

Medicaid, it is 4.5 percent.

That does not mean to me that it is that inefficient as compared

to those other two categories. What I believe has happened with

Medicaid, is that you have Medicare picking up more and more of

the cost of long-term care.

It is the payor of last resort for many people who need some type

of long-term care, so the population shift, the number of people in

Medicaid has gone up, the number of people requiring long-term

care has gone up, and that is why the costs keep going up.

So, it is not the inefficiency of the system, it is the fact that we

do not have any policy for providing long-term care in the country.

We never have had. There is no effort that I know of to provide

such a benefit to anybody. Accordingly, it all falls on Medicaid to

do it.

I would be interested in your reaction to that and whether you

agree that, really, the focus, if we are serious about reform of Medicaid, ought to be on reforming the long-term care system for the

country so that we do not just have more and more people going

into Medicaid to get that benefit.

One other thing I would mention, is that Senator Smith and I

have co-sponsored a bill to establish a commission to look at Medicaid and find proposals that would help Medicaid serve the public

better. I would be interested in any comments you might have on

that.

I think I mentioned that to you when we had a chance to visit

before as something I think would be a very constructive step in

developing some kind of bipartisan approach to solving our Medicaid problems.

Mr. LEAVITT. Senator, I have only had a chance to glance at

these, but let me just give you some top-of-mind responses.

Senator BINGAMAN. Please.

Mr. LEAVITT. The first thing that jumps out to me is a bias and

a feeling that I hold deeply, that the entire system of health care

in our country is inefficient, that we can dramatically improve it.

We will not do so by fussing around the edges. We will have to be

bold and, I believe over the course of time, transformational.

I believe technology is at the heart of that opportunity and that

we can, in fact, effect it as a national government, not just in terms

of our policy, but in the way we manage Medicaid and Medicare.

27

The second point. I do not know the extent to which these numbers reflect the rather significant pressures that States have been

under in terms of their Medicaid financing. That may, in fact, bear

on this, but I do not want that to diminish from the point I think

you are making that is absolutely true. That is, that long-term care

is, in fact, the most significant challenge we face, both in Medicaid

and in Medicare.

I point to what I see as an interesting laboratory on this subject

in the States of New Hampshire and Vermont, two very similar

States, side by side, and one would have to argue, very similar cultures, very similar topography and demographics. One has concentrated its efforts on being able to provide home health care for

long-term care, the other has not.

Vermont uses about 15 percent of its Medicaid dollars for longterm care. New Hampshire, on the other hand, is at 51 percent. It

is nearly twice as expensive. I believe that is the kind of thing we

need to look for as a means of being able to find solutions to what

I believe you have nailed as being the big culprit in the future.

Senator BINGAMAN. No. I would agree. I appreciate that answer

very much. It is my view that States need to be able to provide

home- and community-based coverage without going to you or the

Department for a waiver. I mean, I think that is something that

we ought to legislate here. I think the administration ought to support it.

As I understand the law today, States can let more people into

nursing homes, and Medicaid will pick up the tab. If they want to

provide services at a person’s home, then they have to go to you

for a waiver. That seems to me just backwards.

I am not suggesting that they have to get a waiver for folks going

into nursing homes, but they certainly should not have to get a

waiver from the Federal Government in order to do what you are

saying has worked so effectively in Vermont and New Hampshire.

Mr. LEAVITT. That is a very good illustration of something I

heard Senator Baucus also express a concern on. That is, the way

we are using 1115 waivers.

Now, I want to say, I have been the beneficiary of them. I believe

they are a good tool for innovating and solving specific problems.

They clearly ought to be used inside the law, and be transparent.

But there are certain of these subjects that we ought not to have

to do waivers on. We had, in the State that I governed for 11 years,

a State nursing home program where we could do it with solely

State dollars, but it was, frankly, quite limited by the capacity we

had to fund it.

But the fire power we gained in being able to deliver services

with those limited dollars were dramatically leveraged by the goodness of people who wanted to care for their family members. Those

centenarians that I spoke about that came to our celebration, they

were all surrounded by their family who cared for them.

Now, I know that there were some of them that had to be cared

for in institutions, but for the most part, there was family who

cared, and wanted to care. I am a deep believer that that is not

just valuable, but it is good for the soul of those who do it and we

ought to be enabling it.

Senator BINGAMAN. My time is up, Mr. Chairman.

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The CHAIRMAN. Senator Smith?

Senator SMITH. Governor Leavitt, I want to join the chorus of

your family, friends and admirers who sing your praises. I look forward to voting enthusiastically for your confirmation.

I also want to welcome my colleague, Senator Wyden, to the Finance Committee and know that much good will come of our bipartisan efforts here on behalf of health care and many other issues

before this committee.

Governor, to Senator Bingaman’s point, Senator Harkin and I

have a bill called The Money Follows the Person that goes to the

very thing you are talking about, and I would commend it to you.

In fact, I believe the President has expressed support for it.

Also, to another point Senator Bingaman was mentioning, he and

I are about to introduce a bill that proposes a Medicaid commission, a bicameral, bipartisan commission that would study Medicaid before we begin to do things that, frankly, we might regret.

We have had commissions on Social Security, taxes, and about

every other issue around here, but I am not aware of one on Medicaid.

I wonder if you would agree that passing a budget or funding

changes that cut Medicaid should not happen until there has been

a Federal and State discussion on this. I fear that time is running

out.

Do you have a feeling about that?

Mr. LEAVITT. Senator, I have expressed, I think, in a robust way

my belief, that changes need to be made in Medicaid and I am anxious to see them occur. I am anxious to see them occur as quickly

as they can. I am not in a position to comment on behalf of the administration with respect to their position on the specific bill that

you offered.

If I could mention, however, there is a need, in whatever forum,

for a rigorous discussion on the kind of flexibilities that Senator

Bingaman referenced, and the long-term care issues.

I mentioned earlier that I believe in the need to have a sensitive,

somewhat awkward, but very important discussion with the State

partners about real commitments and real dollars. All of that needs

to be a discussion, and some of it needs to happen fairly soon. So,

I would only say, let us have the discussion in whatever forum.

There is a full agenda.

Senator SMITH. I am sure you are hearing from your colleagues,

the governors, how much anxiety there is on this issue.

I apologize for having canceled our meeting. I did not want to

share with you the symptoms of the flu.

Mr. LEAVITT. We had our own little epidemic of that at the

Leavitt home. I successfully report our conclusion.

Senator SMITH. Well, given what happened with the Shearing

Corporation in Britain, I wonder if your Agency is taking some

leadership in making sure we do not have a flu vaccine shortage

next year.

Mr. LEAVITT. Of course, when the President asked, I began reviewing quickly the things I might confront, this being one of them.

What I would say, Senator, is I fully recognize the seriousness and

the potential danger that exists from a nation not prepared for

this. I believe there are many things that can be learned from our

29

experience, and I am resolved both to learn them and to implement

those lessons.

Senator SMITH. I believe Senator Wyden will probably raise the

TANF issue with you, so I am not going to spend time on that. But

Oregon, like Utah, has been a real innovator in this issue and we

need your help and understanding on this reauthorization.

An issue close to my heart for family reasons is the whole issue

of mental health. You and I spoke about the Garrett Lee Smith Memorial Act and my hope that the administration will continue its

remarkable support in the passage of the legislation and its initial

funding. I hope that you will help focus on that as well and help

us pass full funding for this next fiscal year.

In addition to that, I am one of the Republicans who actually is

enthusiastic about mental health care parity and believe it is important we bring this issue out of the shadows and help people understand mental illnesses can be just as lethal as physical illnesses.

Until we understand that and address it in our law, I think we are

taking care of half the equation. I do not know if you have a comment on that.

Mr. LEAVITT. I am going to express agreement on both points.

Senator SMITH. In fact, I do believe that President Bush has also

expressed his support for mental health care parity. So, I see my

time is ending. I will just conclude by saying that, under the TANF

reauthorization, Oregon has had some remarkable success in

crafting individualized kinds of programs for people on welfare and

getting them to work.

But timing is an issue and enough flexibility is an issue to bring

about the kinds of success stories that they can tell all day long.

So, I really do hope that, as we go to reauthorize this, that States

will be given the flexibility to be pioneers in this area.

Mr. LEAVITT. Thank you. That is a discussion I will enthusiastically involve myself in, whether it is raised by Senator Smith or

Senator Wyden.

Senator SMITH. Thank you, Governor.

The CHAIRMAN. Next, is Senator Wyden.

Senator WYDEN. Thank you, Mr. Chairman. I just want to express my appreciation to you, Mr. Chairman, and to Senator Baucus for your gracious welcome, and to think that somebody who is

the director of the Gray Panthers could have a chance to work on

this committee in a bipartisan way is just an extraordinary thrill.

I just want to express my thanks to you, Senator Smith, and other

colleagues who have been so welcoming, Senator Snowe, Senator

Lott, and others.

Governor, you are eminently qualified for this position. I am

going to be supporting you, and supporting you strongly. I just

want to use this, almost by way of starting the teaching, I think,

that we are all going to be going through to tackle this in a bipartisan way.

First, Senator Snowe touched on the bill that she and I have, the

MEND legislation, Medicare Enhancement for Needed Drugs. I just

want to express my thanks to you for our conversation, because I

think we have opened up another way to look at it.

What Senator Snowe and I have wanted to do, is use marketplace forces to contain the cost of prescription drugs, in effect, like

30

Weyerhauser, a big timber company, would, or a health plan, or

anybody else. You have opened up the door to us on that and I appreciate the chance to discuss that with you.

Let me, if I might, ask about this Medicaid issue in a different

way, because, as you know, we have tried in Oregon—you worked

with John Kitzhauber—to really use waivers in a humanitarian

kind of fashion. We said, let us get necessary benefits to people. Let

us make sure it improves their quality of life and is medically effective.

The concern is that, if we have block grants of any form with

that kind of rigid cap, that that would make it harder for some of

these kinds of creative waivers that really do help people.

Can you tell us that you will just oppose the block grant concept

as it relates to Medicaid? I think if we have that assurance, we are

off to the races in terms of a bipartisan effort to really come up

with the flexibility that you and others want. But it would be very

helpful if you could tell us if the block grant concept, as it relates

to Medicaid, is off the table.

Mr. LEAVITT. Senator, I know of no block grant proposal that

would come to you.

Senator WYDEN. That is certainly what I wanted to hear. I think,

for colleagues, that really opens up the door now to look at flexibility in a creative kind of way, and I appreciate that.

The second area I wanted to get your reaction to is, I am excited

about your interest in health care technology. A lot of us—Senator

Smith and I—have many constituents who care about it.

But as I think you know, David Brailer’s office, the office has

largely been de-funded. I mean, they have lost a lot of the money

that they need. I would like to see us go forward with bipartisan

work in the health technology area.

Can you tell us that that will be a priority for us to once again

get bipartisan support for that office, get them the dollars they

need so we can build on some of the innovative work that is being

done?

Mr. LEAVITT. I had not been announced as a nominee very many

days before I sought Dr. Brailer out. That is an area of interest,

and I had read about his work. I have had meetings with him because I believe in the vision that efficiency can be created in our

society through technology in health care.

It must happen because we are simply seeing such expansive

growth in health care costs, that I believe that they begin to threaten our economic competitiveness as a Nation.

I believe the day will soon come when a doctor can leave an examination of a patient and fill out a prescription on his or her PDA

and have it transmitted wirelessly to a pharmacy of the patient’s

choosing, and have it being filled before the patient leaves the

parking lot of the physician’s office, and that that prescription can

be billed to their insurance company in the same transaction, and

their electronic health record updated, and the patient be wellserved by that whole thing. That is efficiency.

That begins to meet the vision that I believe we are talking

about as opposed to the moment when we all go to the doctor, we

wait, we get a prescription, a handwritten prescription we may or

may not be able to read, we take it to the pharmacy, we wait. That

31

is an inefficient system and does not serve the American people

well.

We can improve it, and I look forward to finding ways to go

through what is a very complex transition as a society that we are

engaged in right now.

This is not just happening in health care. It is happening in

banking, in finance, in manufacturing, and in virtually every aspect of American society. You and I share an interest in that and

I look forward to more conversations and ways to move that forward to more efficiency.

Senator WYDEN. My time is up. I just think that, on a bipartisan

basis, we have got to make sure that Dr. Brailer has some resources. I was troubled by the fact that, after all the talk, frankly,

by both political parties, to a great extent, that office has been defunded. Perhaps we can get into those issues a little more on the

second round. Thank you, Mr. Chairman.

The CHAIRMAN. Now, Mrs. Lincoln. Senator Lincoln, then Senators Bunning, Crapo, and Lott.

Senator LINCOLN. Thank you, Mr. Chairman. Happy New Year

to you.

The CHAIRMAN. Happy New Year to you, too. Especially since you

do not have any amendments in your hands. [Laughter.]

Senator LINCOLN. Not today. [Laughter.]

I, too, would like to join the committee in welcoming you, Governor. We are glad you are here. We look forward to working with

you. We have many, many questions to tackle and many things

that we can do together, and we are looking forward to that.

I would also like to welcome the new members of the committee,

Senator Wyden, Senator Schumer, and Senator Crapo. Senator

Crapo and I have tagged along together in many places. We started

in the House together, went to Energy and Commerce together,

came over to the Senate together, Agriculture together, and now in

Finance. So, I look forward to working with all of them.

I also want to thank you for the time that you have taken to

come around and visit with many of us. We do have a lot of questions. I will submit as many of my questions for the record as I can.

[The questions appear in the appendix.]

Senator LINCOLN. I do want to associate myself with Senator

Bingaman’s comments about Medicaid and its ability to manage

the costs that it has. I know, time and again, I have heard your

analogy of Medicaid as being a very, I guess your term is rich, I

guess, or a rich plan compared to others.

I would just hope that, again, we make sure that we look at what

is being compared in terms of maybe, perhaps, apples to oranges,

when we realize the tremendous impact that the aging community

out there has on the Medicaid dollars.

I know in Arkansas, we have some statistics that really point that out. Medicaid spends about $2,000-plus a year on beneficiaries

that are 20 years and younger, but for beneficiaries that are over

the age of 65, Medicaid spends almost $11,000 a year.

So, when you look at the amount of money that we are investing

in our aging population and the tremendous impact that long-term

care has on Medicaid, it is clearly a critical issue to making sure

that we provide quality of care for our aging parents and grandVerDate 11-MAY-2000 16:11 Nov 08, 2005 Jkt 095484 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 20932.000 SFINANC2 PsN: SFINANC2
32

parents, which we want to do, but making sure that we can keep

that program going. So, I hope that we will be very honest and focused on the differences that are there.

You have had many innovative ideas in your waivers, and as a

governor you have looked at those objectively. You have said the

element of trust is important, and I concur with you wholeheartedly that trust is a critical part of what all of us have to do

as public servants.

I hope and trust that you will share with us not only the good

things that you learned as governor in the waivers and the programs that you were so innovative with, but I also hope that you

will share with us the downfalls, the things that did not work and

what we can do to change that.

A couple of questions that I have on some most recent things. As

you may know, the MEDPAC Commission has recommended cutting Medicare hospital payments in 2006. Those of us who do represent rural States—and we have talked an awful lot about the

rural issues—have some great concerns, as do others.

I guess it is surprising, considering the evidence, that hospital

margins under Medicare have declined in recent years to an expected average of negative margins in 2005. The MEDPAC also

shows that Medicare has over-paid managed care plans in Medicare.

We subsidize those managed care plans in the Medicare reform

piece to a tremendous amount. For States like ours that do not

have any Medicare+Choice or managed Medicare products, we feel

a little left out on that enormous spending of money.

They have shown that Medicare payments to the Medicare+

Choice plans average 107 percent of the cost to cover similar beneficiaries in traditional Medicare. I think that is important.

I guess my question would be, do you support the cuts to the hospitals, and do you think that there is any way we could look at a

more fair, and probably a more fiscally responsible, way to cut back

on over-payments to managed care plans as opposed to cutting

some of our hospitals that are operating, really, at negative margins?

Mr. LEAVITT. Senator, I have only read press accounts of the

newest report. As I indicated earlier, it is clear to me that when

you are splitting up dollars, it requires our best statesmanship and

a lot of patience. I have been in those discussions before, both at

the Federal and State level. I pledge to you that I will do my best

to be a productive force in the discussion.

I wish I could report to you that I had the magic wand that could

make the difficulty of these go away. I must also say, I have been

involved in these cost discussions among hospitals, academic health

centers, for example, and trying to figure out where the costs are

within those.

To say they are confusing is an understatement. To say they are

complex is accurate, but also seems underwhelming as an adjective.

I will do my best to be part of this commentary.

Senator LINCOLN. Well, I know you do not have a magic wand,

but I do know that you will have a lot to say. Certainly, your word

and your input will have a lot to do in how we most efficiently use

those dollars.

33

One other thing is the automatic enrollment of the MSP population in the drug benefit. In its proposed regulation, I know CMS

decided to randomly enroll the dual eligibles into the drug plan if

they do not choose one.

While CMS has, on the other hand, deemed participants in the

Medicare savings programs—and my staff always tells me, never

use the QMBs and the SLMBs, but those are the MSP folks that

are eligible for that low-income subsidy, it has not decided whether

to randomly enroll them in the drug plan if they do not choose one.

I would just say that we have really, really desperately worked

with CMS to encourage them. These low-income individuals who

get a subsidy through Medicare for their deductibles and their premiums on Medicare are highly in need of being enrolled in those

drug plans.

We encouraged CMS to do so in the drug card. They did not, or

reluctantly waited until the middle of October to get these people.

We are seeing a very disproportionate share; less than a quarter

of those that are eligible in our State are enrolled.

The numbers that we have been asking for since June we had

not gotten until today, unfortunately, State by State. That kind of

information is enormously important for us to be able to ask the

right questions and to help you in coming up with the kind of answers that are going to make these programs efficient and effective.

But I would ask you to seriously consider the automatic enrollment of those MSPs in the drug program. We tried to get it into

the drug card, not just because we want to make sure that these

low-income seniors have a program. That $600 would have meant

a tremendous amount to that disproportionate share of low-income

seniors that did not get it this year.

I just hope we will not miss that opportunity to provide these

seniors, not just because they deserve it and it is a quality of life

that we should be helping to provide to them, but it also is enormously important in their confidence in what we can do. As we all

know, seniors can be reluctant if they are not confident and trusting in what we need to do. So, I encourage you to do that as well.

Mr. LEAVITT. Thank you.

The CHAIRMAN. Thank you, Senator.

Now the next person is Senator Bunning.

Senator BUNNING. Thank you, Mr. Chairman.

Welcome, Governor.

Mr. LEAVITT. Thank you.

Senator BUNNING. Utah and Kentucky have similar problems.

We are both kind of rural States, except for a major area like Salt

Lake City and like Louisville. We are facing some of our most

pressing challenges in providing health care in rural areas.

As Secretary, what areas will you focus on in respect to rural

health care?

Mr. LEAVITT. Senator, a surprising outcome to me of our SCHIP

effort was that 50 percent of our enrollees came from rural Utah,

and only 14 percent of our population exists there. That surprised

me, but it also taught me that that is an important tool in serving

rural communities.

I have also come to understand how valuable community health

centers can be in rural areas, not just metropolitan areas. I have

34

come to appreciate the importance of being able to have providers,

nurses, physicians, and others who are targeted in those areas who

are prepared to serve them.

I have come to have the bias that the best people to serve there

are people who live there, who grew up there, and who want to go

back there. I would cite those as three examples.

Senator BUNNING. In regards to the SCHIP program, we have

had an unusual problem in accessing that to our children. In other

words, the people in Kentucky have not enrolled in the numbers we

expected. We have had a very similar experience, but not nearly as

bad, with the Medicaid prescription drug program.

What kind of stimulants can you look for if my SCHIP program

in Kentucky is not at 50 percent, or not at 15 percent, or not at

20 percent? What suggestions do you, as Secretary of Health and

Human Services, see in making that more available and more accessible to those people?

Mr. LEAVITT. My experience will only reflect that of one governor

who went through the experience.

Senator BUNNING. That is fine.

Mr. LEAVITT. But I think we did it successfully, and I would offer

the following. Another surprise to me. We were able to enroll nearly half of our total enrollment population, which exceeded our capacity, on-line.

Senator BUNNING. On-line? That is a problem in Kentucky,

though.

Mr. LEAVITT. Well, it surprised me that it would not be a problem in our State. People did not believe that those we were trying

to reach would have access to the technology, but in reality, they

do. We integrated our enrollment search with our schools.

We worked very hard to use it as a tool available to those in our

Human Services. It was strictly a function of finding them. I know

the President feels strongly about allocating resources to States

who will devote themselves to finding those who have needs. They

are there.

As I indicated, we did it a little different way in that we created

our own plan, as opposed to adopting Medicaid. We were able to

increase coverage by a factor of one-third. We covered one-third

more children and we have more who would like to be on it than

we have the capacity to serve, but they are anxious to continue to

expand it.

Senator BUNNING. Well, I think the school is obviously the best

tool. Then, following up as you did through the school programs

and accessing on-line would be a very good way to get to the nonparticipants.

Mr. LEAVITT. I might also add that a big part of our success was

going into clinics and asking, particularly in the primary care or

community health area. Our system was set up so, when they came

in looking for care, if they did not have coverage, we could give it

to them and provide the care on the spot.

Senator BUNNING. Obesity. We read a lot about it. This country

seems to be obsessed with it. It is a problem in this country. What

do you think Health and Human Services’ role should be in combatting obesity?

35

Mr. LEAVITT. I believe the work that the Department has undertaken under Secretary Thompson’s leadership has been exemplary.

I think the fact that we are calling people’s attention to it and its

enormous role in terms of factors of diabetes and heart disease.

I believe it is symptomatic of what I hope the Agency can be, or

at least what I would aspire to make the Agency, that is, to open

an era of health prevention, not simply treat. We have picked the

low-hanging fruit in this country, I believe, on treatment.

The real opportunity for gain is in prevention and obesity plays

out in so many leverage points that it is a worthy campaign and

one that I intend to continue if I am confirmed, and one that I believe will pay big dividends.

Senator BUNNING. Thank you. My time has expired. I want to

also submit to you some questions on steroids and other types of

things that seem to have worked their way into our society in various methods. I will submit them in writing for answers.

Mr. LEAVITT. I will be intrigued to receive them. Thank you.

[The questions appear in the appendix.]

Senator LOTT. Senator Crapo?

Senator CRAPO. Thank you very much, Senator Lott.

Governor, I also want to join with those who commend you, and

commit to you our support for your nomination and confirmation.

As you know, when we visited we talked about an issue of great

importance to me, and that is chronic obstructive pulmonary disease, or COPD. To raise awareness of COPD, I have actually joined

with some others and formed a Congressional COPD Caucus, which

my colleague, Senator Lincoln, is the co-chairman of here in the

Senate.

One important statistic that I think you will come to know very

well, is that the annual per capital expenditures for Medicare beneficiaries with COPD is two and a half times higher than those

without COPD.

What is more is that, while the death rates from heart disease,

stroke, and other cardiovascular disease have been falling dramatically over the last 30 years as a result of our efforts to try to defeat

these diseases, the death rates for COPD are continuing to rise. In

fact, it is the only major disease now that we are not starting to

see a way to get a handle on.

The question I have for you is, have you given some thought as

to how HHS can help in slowing this trend and in dealing with

COPD, and how can we expand the prevention and awareness of

this disease, which is the fourth leading cause of death in the

United States?

Mr. LEAVITT. Well, Senator, I will say that your campaign has

already been effective with me. I was not conscious, actually, of the

ailment by that name. But I thought we had a fascinating conversation in your office.

As I looked at the cause, I said, to Senator Lincoln, to Senator

Crapo, you are approaching me in my potential role as Secretary

of HHS. But this is really an environmental issue as well because

this is about what happens when particulate matter from ambient

air begins to inculcate itself into the lungs.

Senator CRAPO. That is right.

36

Mr. LEAVITT. We are on the verge in this country, under the

President’s direction, of implementing the Clean Air Interstate

Rule, or the President’s Clear Skies, which would be a 70 percent

reduction in pollution from power plants.

We have also recently implemented the Clean Diesel rule, which

will basically dramatically reduce, by some 90-some-odd percent,

the pollutants that are coming from diesel fuel. Those tiny black

particles that are about the size of one-thirtieth of a human hair

inculcate themselves in the lung, and that is what causes, in large

measure, COPD.

I would suggest that that will be a giant leap forward in being

able to deal with it. I think, also, as a good example, Senator

Bunning, of the kind of things we can do in terms of prevention to

reduce medical costs and to make this system more efficient. This

kind of action and being able to prevent ailments will pay far

greater dividends than our efforts to heal them more efficiently.

Senator CRAPO. You make me hope that you can continue to have

a major influence at the EPA as well. If we can get HHS and the

EPA focused on COPD, then we will make a lot of progress.

Mr. LEAVITT. We ought to make the President’s Clear Skies initiative a very good COPD campaign.

Senator CRAPO. We will do that.

Another question that I wanted to ask you, is that the President

has been focused very aggressively on rural health care. In that

context, he has made a very strong commitment to an investment

in community health centers. Could you discuss that and the role

that you believe HHS will play in that effort?

Mr. LEAVITT. Well, I am not familiar directly with the initiatives

of the Department. I hope to become, because I share the commitment that you have expressed about the need for access to all of

our citizens.

I know that access to primary, high-quality care in rural communities is a vital part of their economic vibrance, and for years, as

governor in developing the infrastructure necessary for vibrant

rural economies, health care, higher education, public education

were all basics. So, I will look forward to learning more about the

initiative you have spoken of. I am not able to add to the conversation yet, but I hope to be.

Senator CRAPO. All right.

Then, just lastly, I appreciated your interchange with Senator

Wyden with regard to health information technologies and efficiencies. I would just like to alert you, I serve as the co-chair here

in the Senator on the Steering Committee on Tele-Health and

would like to work closely with you and the Department on initiatives to make sure that we take maximum advantage of our ability

to expand access to health care and improve the quality of health

care through tele-medicine.

Mr. LEAVITT. These conversations do nothing but whet my appetite and heighten my anticipation. These are issues I like, enjoy,

and have had some interrelationship with, and I look forward to

being part of that.

Senator CRAPO. Thank you.

The CHAIRMAN. Senator Lott?

37

Senator LOTT. Thank you very much, Mr. Chairman. First, Mr.

Chairman, I ask consent that my prepared statement be made a

part of the record.

The CHAIRMAN. It will be made a part of the record.

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

Senator LOTT. And I want to thank you for moving aggressively

to have this hearing and the cooperation from the Democratic

members of the committee, and the agreement that hopefully we

could get a vote this afternoon, but as soon as is physically possible

when we can get the requisite numbers here.

To you, Governor Leavitt, congratulations and commiserations.

[Laughter.] And to your family, your wife, your children, thank you

for being willing to make this sacrifice. It is that, but it is certainly

a worthy one and one that is needed, and we do appreciate it.

You must really want to serve to be governor of a State, then to

be Administrator at EPA, and now to be Secretary of HHS. I am

proud of you, but I want to talk to you a little bit about why you

would want to do all these things.

But, seriously, it is a huge undertaking, a very important one,

and I think you are the right man for the job. I am glad that you

were available and the President had the wisdom to select you and

nominate you for this position. I believe you certainly will get an

early, and probably unanimous, confirmation. Having been a governor and having been head of EPA, to be able to achieve that, is

miraculous, actually.

I have worked with you as a governor during the 1990s when we

were working on a lot of innovative programs. I have always enjoyed the way you thought outside the box, your aggressiveness in

trying to get things done. You are an action-oriented individual,

and that is what you need as a governor in this position. So, I

thank you for what you have already done.

What you did with Medicaid in your own State, getting 25,000

more Utahns on this system, and the way you did it. I believe you

got the first waiver of its kind from the Bush Administration of the

Health Insurance Flexibility Initiative, and that made a difference.

You set an example of what can be done if you take a look at

how you can serve the people that really need it the most, and

sometimes that means making some changes.

One of the things you said, I want to add a little bit to. You said

‘‘provide care to the largest number of people possible.’’ That is not

our goal, I do not believe, as a government. It is to provide care

to the largest number of people who need it. There is a distinct difference in that.

Mr. LEAVITT. I accept that.

Senator LOTT. We do not want to give it to everybody we can afford to. Maybe they do not need it. But we need to make sure that

those who need it have it in the right way, it is affordable, accessible, and all those other things.

So, I worry a little bit sometimes that we keep trying to push

that envelope to make it available to more and more and more people when we are not necessarily helping the people that need it the

most in the ways that they need it. I mean, the fact that you expanded a provision in dental was innovative at the time, I think.

38

I spoke to our own governor of Mississippi, Haley Barbour, a gentleman you know and have worked with in the past, today. He said

to just please say to you, continue that flexibility in the SCHIP program that you have been talking about.

I understand maybe CMS has made some decisions about how

funds that are maybe not able to be used can be used by other

States who have, perhaps, a greater need. I hope that that is accurate information and that you will support and push for that. I remember, you helped us work on welfare reform, which has not only

reduced the rolls, but has allowed us to have ways to help people.

It was never about cutting people off, it was about giving people

a bridge to a better education, child care, self-help, and opportunity. There are some miraculous stories that you and Governor

Tommy Thompson did at HHS when he was Secretary, and before

that when he was in Wisconsin.

So, I have my prepared statement in the record, and I will not

go through a long dissertation lauding you for your service. You

have a real challenge before you.

I was going to ask a question about the obesity program. I have

my pedometer right here. Tommy Thompson pushed it very aggressively. He was also able to do a show-and-tell. He was able to show

a before-and-after when he actually lost weight. I do not think

there is much you can do in that regard.

Mr. LEAVITT. I have got my own campaign going, Senator.

Senator LOTT. All right. Good. Good.

But, again, it is very serious. It is a serious health problem in

America. People that are obese, extremely overweight, they are

destined for all kinds of health problems. I have family members

and friends who are having to deal with that, so I do hope we will

give it the serious consideration and effort that it deserves.

In my waning time, let me just ask you a little bit more. In our

efforts and initiatives we have undertaken to extend health insurance to low-income citizens, in particular, through Medicare waivers, the covered-at-work program, I think, which you used, and the

SCHIP program, can you give us a little more information of how

you think we can build on what you have done and make this program work better, how we can be helpful?

Because we in the Congress have at some times been an impediment. We have not been willing to loosen up and give the flexibility

that could be more helpful to governors as they wrestle with these

problems.

Mr. LEAVITT. Senator, if there is a principle I would advocate on

the question you have raised, it would be, national standards but

neighborhood solutions. We do need to establish what our National

aspirations are, but they are best met by turning over to local communities the flexibility they need to meet those aspirations. Let me

say that, with respect to your suggestion on the way we express

our aspiration, I accept that.

Lastly, you asked about my state of mind in the context of doing

this. May I say that my time in politics has taught me that public

service is dependent on a steady supply of people who do not know

what they are getting themselves into. [Laughter.]

Senator LOTT. I think you qualify. [Laughter.] Thank you, Mr.

Chairman.

39

The CHAIRMAN. All right. I have had a request, at least from one

member, for questions. Do you want to start a second round of

questions?

Senator BAUCUS. Do you have questions?

The CHAIRMAN. No. If I do, I will do them some other time.

Senator Baucus, then Senator Rockefeller, in that order then.

You will come after Senator Rockefeller.

Senator ROCKEFELLER. She should come before me, Mr. Chairman.

The CHAIRMAN. All right.

But Senator Baucus, first.

Senator BAUCUS. I will defer to the Senator from Maine.

Senator SNOWE. No, that is fine.

The CHAIRMAN. We have five members here. All right. We will

just do a second round in the order.

Senator LOTT. Do we anticipate a vote, Mr. Chairman?

The CHAIRMAN. I think it is going to be very, very difficult, considering the weather outside, based on the discussions that I have

had with staff, that we will be able to have a quorum this afternoon for a vote, but we will wait until the last minute to make that

decision.

Senator Baucus?

Senator BAUCUS. Thank you, Mr. Chairman.

Mr. Leavitt, I would just like to have a little discussion with you

about the Section 1115 waiver authority, if you would, please.

The theory, clearly, is to allow States to initiate demonstrations,

which I think is a great idea. I am sure you agree. I think it is

important to note, though, according to the Department, that $21.5

billion in Federal Medicaid waivers are governed by the 1115 waiver agreements rather than under current Medicaid law. That is a big chunk, $21 billion worth of policies set by waivers

which may or may not be in conformance with the statute. Just to

put that in a little perspective, this is more than 10 percent of the

Federal Medicare spending for the year.

It is also more than the entire discretionary budget for 7 of 15

departments in government. For example, Agriculture, which is

$21 billion, Justice, which is $19 billion, Labor, $12 billion, Treasury, $11 billion. That is, the spending under waivers is much greater than 7 of the 15 departments’ budgets in our Federal Government.

As you know, this committee has expressed concern about waiver

authority. Many of us believe that it has been used to side-step the

law. That is, the authority has been used to go beyond what is contemplated under Medicaid and beyond using the waiver program to

experiment, demonstration projects, and so forth.

As I said in my opening statement, the GAO studied this issue

and they agree. They agree that the administration has gone too

far. The administration has not lived up to the law. They have broken the law by going too far, some of it with respect to budget neutrality, some of it gets to the point of dollars, particularly under

CHIP programs, going to adults, not to children under some of

these waivers.

Also, the process itself has been sort of a black box. It is hard

to know what is being waived and why. There is not much transVerDate 11-MAY-2000 16:11 Nov 08, 2005 Jkt 095484 PO 00000 Frm 00047 Fmt 6633 Sfmt 6633 20932.000 SFINANC2 PsN: SFINANC2
40

parency here, no guidelines. Other States are not sure who is on

first, et cetera.

I would like you to talk about that a little bit and ask you your

view on these 1115 waivers, whether, and the degree to which, you

will increase transparency so there is some general uniformity and

some understanding of good public policy so States, members of

Congress, and the general public can know what the rules are. And

so we know the rules are not just changed midstream, and whether

you will refuse to grant waivers that violate the fundamental aspects of Medicaid, that is, entitlement status, comprehensive benefits for children, and protection of poor people against prohibitive

cost sharing. Under some of these waivers, cost sharing has been

so prohibitive and there are so few hospital stays allowed, that, in

effect, it violates the intent of the Medicaid statute.

Mr. LEAVITT. Senator, let me express that I believe the 1115

waivers are a positive thing, generally, as a tool. They must be

done within the law. They must be done in a transparent way. I

do not believe they should be used as a means of being able to implement policy generally. It should be used to innovate or to find

a specific solution to a problem that is unique to a State.

I do believe there is something to be learned about why there has

been so much pressure for waivers. It is primarily because the law

as it exists does not provide adequate flexibility for those who are

managing what I referred to as neighborhood strategies inherently.

I believe we could mitigate quite substantially the need for waivers if we were to build in the flexibilities into the law within the

parameters that the Congress was prepared to extend. That would,

I think, begin to take some of the pressure off.

Senator BAUCUS. Well, I agree. If there are pressures building

that require changes, the solution should be not to break the law,

but to change the law.

Mr. LEAVITT. We should never set out to break the law, and we

would not.

Senator BAUCUS. According to GAO—which may be wrong, but

most people put a lot of faith in GAO, it is nonpartisan—they said

the administration has not been following the law.

If these pressures are there, as you say they are, to what degree

is the administration going to come forth with proposed changes to

the Medicaid law so that we can accommodate some of those pressures? Can you give me a sense of that?

Mr. LEAVITT. I do not have a sense of that. But I can tell you

that I am anxious to work with the members of this committee,

and with the Congress generally, to find ways to provide a more

efficient atmosphere for Medicaid. It is a big number that we are

moving toward, $5 trillion.

Senator BAUCUS. Right. Could you give me a little better sense

of what you mean by ‘‘transparency’’? It may mean different things

to different people. What does it mean to you?

Mr. LEAVITT. Well, it means to me that the cards are on the table

and people know what you have done and why you did it.

Senator BAUCUS. You, meaning who? Is that Congress?

Mr. LEAVITT. No.

Senator BAUCUS. Is the State involved? Is the Secretary involved? Who is ‘‘you’’?

41

Mr. LEAVITT. I was referring to me as a first party.

Senator BAUCUS. Oh. All right. Who is the second party?

Mr. LEAVITT. Well, I am sure people would appreciate Congress

acting in the same way. I have no reason to believe they have not.

Senator BAUCUS. I hope we have, too. But, again, we have asked

for guidelines. Members of this committee, members not on this

committee, have asked for guidelines, and we do not get very far.

That is an understatement. We do not get anything. So what I am

asking you, is that your definition of transparency or not?

Mr. LEAVITT. I like to operate and manage by principles. I like

to be able to look at a problem and say, we are going to see a number of different examples of this problem. Let us establish a set of

principles that will guide our efforts to create a sense of consistency.

Senator BAUCUS. No, no. And I appreciate that. But, again, I am

asking you, are these principles going to include transparency in

the sense that there are rules, there are guidelines that are public,

that people are afforded an opportunity to comment on, so that

States and the country know what the rule of the road is with respect to waivers, when they are granted, when they are not, and

under what circumstances, rather than this black box, ad hoc process that we have experienced.

Mr. LEAVITT. What you have described makes sense to me. I

have to confess, I do not know the construct of what is there now.

So could we agree, in principle, that that is what needs to occur?

There needs to be a consistency about the way we act. I will do my

best to find ways to express that, whether it is by rule or by statute, that provides a method of transparency.

Senator BAUCUS. Consistent and open to the public, that is what

I mean by transparent. Your policy can be consistent internally.

But I am talking about consistent externally.

Mr. LEAVITT. Those are both the transparency in the way you

have defined it, and a well-informed citizenry is a——

Senator BAUCUS. Because it is just good government.

Mr. LEAVITT. I agree with you.

Senator BAUCUS. We avoid so many problems otherwise.

Mr. LEAVITT. I am working hard to get to a place of agreement

with you, Senator.

Senator BAUCUS. Good. I am working on it, too. [Laughter.] I also

urge you, and I know you believe this anyway—my time has expired—is to make that argument very strongly and effectively within the government, that is, the White House and others that may

have a contrary view.

In my experience these last 4 years, the White House will have

a contrary view. So you are going to have to be very smart and creative within the administration to accomplish good, effective public

policy in a lot of areas.

I do not have time to go over the whole long list, but we are a

little bit, I will not say jaded, but we are a little bit cynical. Not

cynical. We are a little skeptical of some of this. I want to work

with you, and we will work with you. I am just encouraging you,

be smart, be tough.

Mr. LEAVITT. I think we have done it. We have found agreement.

Senator BAUCUS. All right. Good. Thank you.

42

The CHAIRMAN. Senator Hatch has follow-up questions, then

Rockefeller, then Snowe.

Senator HATCH. Just one. I will not be long, Mr. Chairman.

Governor Leavitt, you were governor of Utah when Utah hosted

the 2002 Winter Olympics. The 2002 Winter Olympics was the first

international event to take place after the September 11 terrorist

attacks, and, I might add, the anthrax contamination of the U.S.

Capitol complex.

As a result of your leadership and others’, Utah was well-prepared for the 2002 Winter Olympics, which I thought were the

greatest Winter Olympics, ever.

How will your experiences from hosting the 2002 Olympics shape

your approach to bio-terrorism and for bio-terrorism preparedness

for the United States?

Mr. LEAVITT. Senator, I can best answer that question by reflecting on an event that occurred, I believe, the third or fourth day of

the Olympics. I was at the figure skating event when I got a call

from the Command Center.

Governor, they said, we need you to come. We have detected anthrax in a sensor at the Salt Lake International Airport. Those, of

course, were alarming words to me and I began to move as rapidly

as I could toward the Command Center.

As I moved, my mind began to work. It was about 6:30 at night.

I knew that the Salt Lake International Airport would be, as one

of the major airline hubs, full of airplanes landing, filling with people again, and taking off to other cities.

I remembered quite clearly that some weeks before that we had

found a large population of workers who had not been properly vetted and were not there legally, and I began to see a sort of sinister

plot in my mind unfold, that someone had, in the context of terrorism, released a white, powdery substance into the ventilation

system, and that one of our monitors had picked it up, and it was

being done as a part of terrorist activity during the Games.

I spent about 3 hours at a laboratory waiting for a more delineating test. During the course of that, I saw exercised the proper

protocols necessary to begin asking the questions of what could

occur in a widespread attack of that sort.

Who would we call? Who would be in charge? Would we have the

capacity to deliver the medications necessary in the timeframes required? Who would be the first responders? Would we have the information systems available to track those who had been on airplanes? All of those questions began to come to me.

Three hours later, I was relieved to find that it was a false read

at the airport. We had placed everyone on alert. We had the decision to make as to whether or not to close the airport and turn the

nature of the Olympic Games into something far different than

they were at that moment. We made the right decision, but it was

a rather live-fire exercise for me to understand the depth of how

serious such a problem could be.

If I am confirmed, I will have responsibility, under the Presidential Homeland Security Directive, for bio-terrorism. It is a subject that I take very seriously. I believe the Department has made

substantial progress in its readiness and preparation.

43

The Congress has responded by making appropriations that have

been disseminated among the States. It is a subject that I would

take with real seriousness and make a high priority.

Senator HATCH. I know you would. I think it is important for the

American people to hear what you have to say about that. That is

why I took the time to ask the question.

I am not going to ask any more questions, Mr. Chairman. I just

hope we can confirm Governor Leavitt as soon as we possibly can.

The CHAIRMAN. Senator Rockefeller?

Senator ROCKEFELLER. Thank you very much.

Governor, however long we have gone, just remember, Condi

Rice, 91⁄2 hours yesterday. [Laughter.] And it probably is still

going.

Mr. LEAVITT. I am trying to decide, if I keep my answers short,

if more people will show up, or if I get long, people will come back.

So, maybe you can help me with some advice on that.

Senator ROCKEFELLER. The secret to it is, give long answers.

Mr. LEAVITT. I will do my best, then.

Senator ROCKEFELLER. Then that precludes questions from coming, you see. Then members get a little annoyed and they leave.

Mr. LEAVITT. Now, that is an incentive for a short interaction

then, Senator, and I will do my best.

Senator BAUCUS. That may be your view, Senator. I want long

answers.

Senator ROCKEFELLER. I just want to ask two questions. I will

ask them both. I will ask them separately, obviously, but at the

same time.

This, again, is back to SCHIP. Senator Bunning, that was started in 1997, and it has been an enormous success. But Senator John

Chafee and I worked very, very hard on this committee to try and

get Medicaid to do that, because of the questions you heard from

Jim Bunning and you have heard from others, that every State had

different methods.

I mean, we started organizing committees, our governor at that

time. Committees did not work. It took us, really, 4 years to get

going. It is not easy to do. People say, well, maybe they just do not

care. That is not true, because parents fundamentally care about

their children. In Appalachia, I like to think that is very true. The

idea of home computers is a good one, but most of our folks who

would be eligible for that program would not have that.

I think Senator Bunning was probably referring to eastern Kentucky, where most of his problems are. I do not think there would

be many there, so they would have to go to a public library to take

advantage of the e-rate, which Olympia Snowe and others helped

start and which has been a big boon.

Now, there is a billion dollars left over, $1.07 billion, from 2002.

That is a lot of money. The decision was made simply to reauthorize SCHIP. But the $1.07 billion is still there and there are States

that need that.

You have the sole discretion that remains pending, available, and

you have the discretion to be able to make, still, that $1 billion,

slightly above that, available to States on whatever criteria that

you would select.

44

I would strongly encourage you to do that. One billion dollars is

a lot of money, but a billion dollars in getting children health care

is enormously important. I really think it is worth doing.

People say, well, we keep reauthorizing. Well, TANF went out a

couple of years ago and we cannot get that reauthorized. It is a

hard thing to get done. It seems to me, with that discretion, you

could make an enormous difference. So, I urge that, respectfully.

Second, on the question of dual eligibles, which I will just simply,

as has been mentioned by Blanche Lincoln and others, that being

obviously folks who are of Medicare age, but poor enough that they

also qualified for Medicaid. The amazing thing is, there is almost

6.5 million of those folks in this country, about 38,000 in my State.

Now, we are going to have the question of the transition from the

Medicaid program to the Part D aspect in the prescription drug

program under the new system. The deal sort of says that there is

going to be a 6-week transition period. Now, this does not seem to

be a very big thing, but it is to me. I think it was MEDPAC that

came out this year saying it ought to be 6 months, and they are

right.

The reason is, to get the data shifted, to get the patients—who,

after all, many are in long-term care facilities, et cetera—familiar

with this, as well as to get the prescription transfers correct at the

pharmacies, and all of that which is part of the data sharing, you

know that cannot be done in 6 weeks.

I do not know why 6 weeks was stuck in there. This is not a matter of, is this going to up the cost of anything. It is just a question

of stretching out the transition period to make sure that it is done

effectively for this $6.4 million. I would ask your serious consideration of that, sir.

Mr. LEAVITT. Let me comment on SCHIP. I read today that Secretary Thompson, exercising an authority that I am not certain of

its origin, has reordered the reallocation of nearly $700 million on

SCHIP. So, it is possible. I do not know how to reconcile that with

the $1.1 billion, but nevertheless, some action has been taken on

it.

Senator ROCKEFELLER. All right.

Mr. LEAVITT. On the second point on the dual eligibles, I have

had enough comment on this as I have moved around that it has

fueled my interest. What I have discovered is, I still do not know

why it was 6 weeks, but it is 6 weeks. The capacity for the Department to change it is not statutorily allowed.

So what they are doing, is concluding to make every effort to get

as many during that 6 weeks, and then to make certain that a decision is made on all of them, and then liberally interpreting the

capacity to go back and make changes during ensuing weeks to

make certain that the right decision was made for each.

Senator ROCKEFELLER. Well, if you are correct that it is in the

law, then I stand corrected and then what you are suggesting is a

very good idea. Do what you can now.

Mr. LEAVITT. That is the best information I have.

Senator ROCKEFELLER. Yes. Yes. And you are sensitive to the

problem, so I am satisfied. Thank you.

The CHAIRMAN. Senator Snowe?

Senator SNOWE. Thank you.

45

Just several follow-up questions regarding some dimensions of

Medicaid. I appreciate what you had to say in response to capping

Medicaid as an entitlement and protecting the mandatory populations, which I think obviously is crucial. There has been, as you

know, considerable speculation about the possibilities of block

granting Medicaid.

I think in either instance, in capping it or block granting it, we

cannot mistake it for flexibility, innovation, or even waivers. It is

one thing to receive the money, but it is quite another to cap what

is available to the States and shifting those costs.

Frankly, it is an indeterminate number of people who might be

in need depending on the economy, depending on the need, the

level of uninsured, which seems to be growing by the day to now

45 million, which obviously exacerbates the problems with the

Medicaid program.

So, I hope that we do not see any proposals in that direction,

frankly. I know there has been a lot of discussion about it in the

media and the speculation. All I want to say is, I think it would

be a mistake to go down that road, frankly. It would not only shift

the cost to the States, I think it clearly would undermine support

in those services for the neediest populations in this country, without question.

I should also say, in talking to the governor of my State, one of

the issues that has surfaced regarding the Federal matching rate

under Medicaid is that they use a 3-year look-back. So, for example, between 1998 and 2000 is used as a basis for determining the

Federal matching rate. In 2003, for example, the economy was far

different than it was in the year 2000.

So I would like to be able to update that Federal matching rate,

along with the use of demographics. Again, income is one determination, but demographics are not included in that formula. For

example, an aging population. We have one of the fastest growing

aging populations in the country. The needs of the disabled is another demographic.

So I would hope that we would be able to have some discussions

regarding the ability to change that matching formula. In receiving

this letter from the governor recently, who has gone through an experience because we have seen, actually, a decline in the matching

rate, even though Maine still has one of the highest, because of the

disproportionate number of elderly in our State.

But on the other hand, it was used on the basis of a 3-year period between 1998 through 2000, when obviously our economies

were going, as he said, at a much greater rate than they were, obviously, in 2003. In the last few years, we have lost 20,000 manufacturing jobs.

So, I am going to look at this issue regarding the Federal matching rate to see if there is anything more fairly reflective of some

of the issues that do, I think, have an impact on States’ needs and

on these populations specifically.

Second, I will be also sending you a question regarding disproportionate share. As you know, that is the reimbursement to

hospitals that have a disproportionate number of Medicare- and

Medicaid-eligible individuals.

46

Some of my hospitals in Maine have had a specific problem recently with the CMS interpretation based on a fiscal intermediary

that made the wrong decision regarding whether or not what they

were doing, their practices, were reimbursable. This was back in

the 1990s.

Now they have decided to pursue seeking reimbursement of close to $30 million from these hospitals. CMS, at one point, thought

they would not demand, and now they are reopening the case. I

think the point is, here, there needs to be some consistency.

We already recognize that in the prescription drug law that was

passed, because it included making sure that hospitals were not required to make payments based on erroneous guidelines and dictates by CMS or fiscal intermediaries. Many hospitals were excluded from having to make those payments, but unfortunately, a

lot of hospitals in Maine have not.

So, I really do think that there has to be some consistency in the

interpretation of these statutes, because hospitals, in good faith,

rely on the consultation and decisions made by the fiscal intermediary, and that, of course, is CMS.

It is being reviewed now, but I do think that this cannot continue

to be a problem, because it ultimately results in millions of dollars.

Hospitals ought to be able to rely, one way or the other, on whether

or not they are allowed certain reimbursements and certain expenditures.

Mr. LEAVITT. I can see why looking back retroactively in the way

that you have reflected would be a problem. Not knowing any of

the specifics on the matters that you reference, I will just acknowledge what you have said as being true.

Senator SNOWE. All right. Thank you.

Thank you, Mr. Chairman.

The CHAIRMAN. All right. Now we go to Senator Wyden.

Senator WYDEN. Thank you, Mr. Chairman.

Governor, one of the biggest portions of the prescription drug bill,

of course, was the billions and billions of dollars that have been

earmarked for employers, to keep employers from dropping coverage.

There is great concern I think at this point either that money

will not be fully utilized in an effort to find savings or that the administration is in some way going to give short shrift to that part

of the bill. I would like to hear your thoughts on how you are going

to approach it.

I would be the first to acknowledge there are plenty of reasons

employers have dropped coverage, but we want to make sure that

the prescription drug bill does not provide another reason for that.

I would like to hear your thoughts on that.

Mr. LEAVITT. I would like to respond to your question, Senator,

by raising the horizon a little bit and commenting on the transformational need of detaching health care and employment, generally. This is a policy issue because it is so closely tied to employment.

I believe the 21st century view ultimately will be looking for

ways in which we can empower American consumers who are wellinformed, who own their own health information, who have the

ability to access, and that our policies will move us toward that

47

kind of portability. The problem that you ultimately comment on,

I think, is symptomatic of that.

I am not able to, frankly, add a lot to the conversation on the

prescription drug bill because I am not familiar enough with the

provisions to know what the incentives and disincentives are. I will

become intimately familiar as I am confirmed, but today I am

afraid that is the most I can offer.

Senator WYDEN. Well, I would just hope that, as we look at the

transformational exercise—and I happen to think that there is a lot

to be said for making individuals personally responsible for their

health care—that we realize that this is a population with a lot of

folks who are frail, who are in a position, frankly, in a lot of instances, who find it hard to navigate in the marketplace.

I would just offer up that if we blow, if we muff the way in which

this transition is made, more employers drop coverage, we have

more older people falling between the cracks, that will hinder your

effort to bring about the transformation.

The second point, is the press in the last few days has been reporting that the National Institutes of Health is going to reduce

substantially a proposal to make research that the taxpayers have

funded available to the country.

Now, I am sure you are just starting to get into this, but I would

find it helpful if you could just tell us about your commitment to

making sure that the public does get access to this information, because these reports in the last couple of days that come from

sources within the Department are pretty troubling.

Mr. LEAVITT. I know very little about the specifics of this issue,

but I can just tell you, in principle, that I believe research that is

made available by government funding ought to add to the knowledge of an informed public generally and ought to be readily and

easily available.

Senator WYDEN. I appreciate that. Let us try to get it down to

that short turn-around time, the 6 months, because otherwise the

taxpayer pays twice. The taxpayer pays, first, when their tax dollars go for the research, and then they have to shell out more to

a scientific publisher. Those publishers fought the Department,

there is no question about that. I appreciate your answer.

Two housekeeping matters, if I could, very briefly, Mr. Chairman. The governor of our State, Ted Kulengowski, believes, after

he read the re-importation report on pharmaceuticals, that he has

a proposal that would address the Department’s concerns.

He has had trouble getting a meeting with the Department. If

you could just reach out to Governor Ted Kulengowski and make

sure that you and your people talk with him, I would appreciate

that.

Mr. LEAVITT. Thank you. So noted.

Senator WYDEN. The last point I wanted to mention is really a

thank you. I think I told you that Senator Hatch and I have

worked for 3 years now on what we think is a transformational

proposal in health care called the Health Care That Works for All

Americans Act.

The Department has been extremely supportive of this, Secretary

Thompson, in particular, his staff. The appointments to the CitiVerDate 11-MAY-2000 16:11 Nov 08, 2005 Jkt 095484 PO 00000 Frm 00055 Fmt 6633 Sfmt 6633 20932.000 SFINANC2 PsN: SFINANC2
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zens Health Care Working Group are going to get named by the

General Accountability Office at the end of February.

I think this provides an opportunity for the Congress, on a bipartisan basis, to have the discussion about how to create a system

that works for everybody, and a very different one, and it is one

that Senator Hatch and I have put more than 3 years into.

I want to thank the Department for their support, and also to get

it on your radar, as we talked about briefly, for the days ahead.

Mr. LEAVITT. I will look forward to that discussion.

Senator WYDEN. All right.

Thank you, Mr. Chairman.

The CHAIRMAN. Senator Lincoln?

Senator LINCOLN. Thank you, Mr. Chairman.

Governor, I would just like to qualify from one of Senator Wyden’s earlier questions. I know in your previous positions you have

supported block grants. Your answer to his question, I am not sure

if I should interpret that as meaning that you no longer support

block grants, or you continue to support block grants in Medicaid.

Mr. LEAVITT. My position has always been that mandatory populations which form up the basis of the Medicaid program as a foundation should remain mandatory, and that optional populations

should remain optional.

Senator LINCOLN. So you are only talking about block granting

the optional? Of course, we know that two-thirds is really optional

out of Medicaid.

Mr. LEAVITT. Senator, the tension we have always felt on these

is putting States in a position where it was all or nothing. As a

governor, you were faced with not having any capacity to use available resources to reach the maximum number of people. That has

always been the tension.

The difficulty has been that, if they are simply optional, yes or

no, and we have no capacity to move in between, then States are

forced into places where they make decisions they regret they have

to make.

Senator LINCOLN. So is your support of block grants really more

for the flexibility?

Mr. LEAVITT. Well, my support——

Senator LINCOLN. If we offered you flexibility with per capita

caps, is that something that is of more interest to you than it used

to be?

Mr. LEAVITT. We are looking back now over a period of a long

time, and there were many different proposals, some of which were

referred to as block grants, some of them were not, some were

thought of as caps, others were not.

The best way for me to respond to your question is to simply give

you, as straightforward as I can, my philosophy.

I believe Medicaid does need to have a foundation of mandatory

populations and mandatory coverages, and that States need to

have the flexibility to build on that according to their own ingenuity, and that they need to have the maximum level of flexibility

to reach the largest number of people possible with a benefit plan

that approximates that which they believe in their State they can,

in fact, afford, and we ought to be their partner so long as they do

49

not fall below the basic foundation pieces of mandatory populations

and mandatory benefits.

Senator LINCOLN. All right. Thank you.

Also, just going back to TANF, we have reauthorized that for 3

years. We have had eight extensions. The administration has frozen child care funding, I guess, for the last few years. The cost of

child care has grown tremendously.

I do not know that I am the only one, but I am one of the few

in this room that, when the snow came down, I had to worry about

where my children were going to be when extended day at school

was canceled, which it was. So, I think the issue of child care for

our working families in this country is enormous.

What are you going to do to address that? I mean, the issue of

the frozen funding for child care, whether or not we are going to

move forward on some of those issues and really look at what it

reflects for working families.

Mr. LEAVITT. I suspect the most important expression I can make

to you is that you understand my belief that it is unreasonable for

us to be working to have a single mother or father who is caring

for children and have an expectation that they will spend their full

time out of the home and not have availability of reasonable cost,

safe child care. That has been evident to me as we have moved

through the whole welfare reform process.

Senator LINCOLN. I am glad to hear that, because when we talk

about additional work hours and more requirements, and yet we do

not talk about the increased need of funding, I know that it has

certainly increased the wait list in our State over the past 3 years

in terms of a need out there for our working families.

Mr. LEAVITT. It would likely be important for me then to complete my thoughts on this, because one of the great successes that

I believe we have accomplished as a Nation over the last 5 or 6

years now has been a dramatic reduction in the amount of the

caseload on a State-wide basis. In my own case, we have gone from

about 20,000 families down to as low as 7,000.

Senator LINCOLN. And those are good numbers. The key is, we

realize we are now left with the more difficult, those that have two

or three or more of the barriers there that exist, whether it be

transportation, child care, and all of the other. So, I hope we will

not miss that.

The last thing I want to get in before my time expires is extending the penalty period. Forty million Medicare beneficiaries, their

premium penalties will apply. There will be penalties to their premiums after May 15 of 2006 if they fail to sign up for a drug plan.

Unfortunately, with the disappointingly low enrollment in these

drug discount cards, which only 14 percent have enrolled, do you

think the deadline should be extended? We have extended it for

military families going into Medicare, but only temporarily.

Mr. LEAVITT. I do not know if the statutory authority exists to

do that. What I do know, is that we are moving into a dramatic

new phase of Medicare. I am guessing that some of these dilemmas

were faced with Part A and Part B, and that we ought to do what

we can and what we need to do to make certain that we ultimately

work our way through this transition.

50

I indicated earlier that it is not going to be without flaw, it will

not be without lesson. We will not fail. We will succeed and we will

do all we can. I met with Senator Murray earlier today and we had

a conversation about the August recess for members of Congress

and the importance of being able to have answers for members of

Congress.

It occurs to me that one of the ways we can do this is to partner

up between the administration and members of Congress as they

go back into their districts so that we can utilize the contact that

you will be having with your constituents. I would like very much

to work with you and other members of the Congress to find ways

in which we can deploy jointly to inform them.

Senator LINCOLN. That is all fine and good, but I would say that

the state is rapidly coming upon us. If we know what the enrollment rate has been on these cards and the effort that has been put

forth, we only have a short time. This is a premium penalty that

will go into perpetuity if it is the same as the current Medicare

premium penalty that exists.

Mr. LEAVITT. I will make inquiry of that. I am not very well-informed as to the penalties, but I will try to become better informed.

Senator LINCOLN. Well, it is a reality for a lot of people out there,

and this can be very dangerous.

The other thing, Mr. Chairman, is I would like to say that I want

to associate myself with the issues of information technology. Technology is vital to the efficiency that medicine can have out there,

but I would remind you that it is costly.

In rural areas, those costs do not just get taken care of. We have

some new and innovative ideas. We are looking at how we can help

rural areas and others afford that, and I hope you will work with

us.

Mr. LEAVITT. Thank you, Senator.

Senator LINCOLN. Thank you.

The CHAIRMAN. I have one question, and that will be my last. I

think Senator Baucus has a few questions he wants to ask, then

we will wind it up.

I would like to address the issue of Congressional oversight. Year

after year, Congress gives the executive branch more authority.

Even so, Congress does not conduct enough oversight, especially

nonpartisan oversight, of the executive branch. The Finance Committee has responsibility over your Department. I take that responsibility very seriously.

Over the last year, I have been questioning the Food & Drug Administration about its reluctance to make public certain information about risks associated with pharmaceutical drugs on the market.

I am also holding Medicare officials accountable as they work to

implement a massive new prescription drug benefit. Five years ago,

I kept the heat on the Agency to finally enforce the laws Congress

had passed in regard to protecting nursing home residents.

Over the years, I have dug into problems in other agencies as

well. For example, I fought alongside a whistle-blower named Dr.

Fred Whitehurst in the mid-1990s to bring about reforms needed

to ensure the integrity of the FBI Crime Lab.

51

I also worked with another whistle-blower who made legitimate

accusations about problems in the FBI’s translation section, which

is so important to the United States’ campaign against terrorism.

The thing is, no matter who is in charge, the bureaucracy seems

to resist scrutiny and the tough questions that come with it.

Too often, government officials think their own agency is an end

unto itself. The people’s government is the last place that that kind

of attitude should be allowed to fester.

That is why I will continue conducting Congressional oversight.

I am willing to dedicate the time and resources to asking questions,

interviewing employees, and reviewing documents to get answers.

I am not going to give up.

During your service as head of this Department that touches the

lives of so many, I would like to have your constant cooperation.

So my question is very simple: will I receive that consistent cooperation, Governor, while you are Secretary of HHS?

Mr. LEAVITT. Senator, I acknowledge the oversight role played by

the Congress, and I will do my best to be a cooperative partner in

being able to provide information.

The CHAIRMAN. Thank you very much.

Senator Baucus?

Senator BAUCUS. Thank you, Mr. Chairman.

Mr. Leavitt, as you well know, a lot of Americans—this is one of

the wonderful parts about our country—really do not like the Federal Government intruding into their personal lives.

I am sure that is true in Utah. In fact, I can think of a couple

of areas in Utah where that is probably true. It is also true in Montana. There are a lot of people I work for who believe that very

firmly, very strongly.

One of the areas that concerns a lot of Montanans is the question

of marriage promotion and domestic violence. A lot of people are

concerned when they hear the Federal Government is thinking

about promoting marriage. Is that not a personal decision, they

ask?

What role does the Federal Government play, what interest do

they have, and is it right to have issues that ‘‘promote marriage’’?

Without digressing, particularly in this modern time, I am not raising the issue of who is allowed to get married.

But, nevertheless, I would just like to ask your views about that

and how far you want to go there, and particularly from the perspective of domestic violence.

There was a survey in Oklahoma recently that showed that 47

percent of divorced women who ended up on TANF had suffered

from domestic violence. That is almost half. If we are going to have

some kind of marriage promotion, the real question is, what does

that mean, what is it? And what about safeguards for women?

Your answer to some of my written questions about this, your

written answer, basically says that unhealthy, abusive, and sometimes violent relationships form and can get worse, in part, because

of a lack of understanding by partners about how they should act

and what they should expect from each other.

Well, there is a lot of truth in that, but that is not always the

case. It is my understanding that domestic violence is not so much

the result of a lack of understanding, but it is about power, someVerDate 11-MAY-2000 16:11 Nov 08, 2005 Jkt 095484 PO 00000 Frm 00059 Fmt 6633 Sfmt 6633 20932.000 SFINANC2 PsN: SFINANC2
52

body exercises power over the other spouse, usually, but not always, the male over the female.

I think we have to be extremely careful going down this road so

we do not cause problems or unintended consequences by, frankly,

encouraging more battered women to stay with an abusive spouse.

I would just like your thoughts on that issue.

You also mentioned in your prepared response that States should

involve local domestic violence experts in the development of service plans they propose for funding. What do you mean by that?

Who are these local domestic violence experts?

The real concern on the part of a lot of people is that, if you start

pushing people into marriage or keeping people in a marriage that

should not continue, you are going to have a lot more violence instead of less.

The CHAIRMAN. Before you answer that, could I also tell Senator

Baucus that this is very much an issue that he raises and we probably have not satisfied you yet on that in our legislation.

Senator BAUCUS. I am just asking questions.

The CHAIRMAN. No. No. But I want to tell you my intent of trying to work on that, because it is a problem.

Senator BAUCUS. All right.

The CHAIRMAN. I do not think the White House even wants that

to happen, and we want to work with you to see if we can address

that adequately. At least, that is our intent.

Senator BAUCUS. This is about the only issue we discuss publicly

because it is the only issue where we have a little bit of a disagreement on handling it.

Mr. LEAVITT. You are doing well. Keep it up.

The CHAIRMAN. And I am not talking to Senator Baucus now to

disagree with him. I am just talking to him about, we do need to

address this. I want you to address his question, too, but I think

we have this bill coming up, and he and I have to work together

to get this worked out. I think, hopefully, we can do it.

Senator BAUCUS. Thank you, Mr. Chairman.

The CHAIRMAN. Yes.

Mr. LEAVITT. Senator, I have been present in many, many situations with victims of domestic violence in shelters that we have created across our State, when I was governor, for that purpose.

I have had occasion to sit with them directly and listen to what

are horrifying tales of difficulty and disruption. I am also aware

that it is a growing trend in our society that cannot be tolerated.

Likewise, I would like to acknowledge——

Senator BAUCUS. Let me just interject here. It stunned me. We

all have these kind of work days where we work at home at some

job. One day I was riding along with the police department in Billings, Montana. It was a Friday evening, near midnight or later.

I was stunned at the number of calls we responded to that were

domestic violence cases. More than half were domestic violence

cases.

Mr. LEAVITT. And they are not always just spousal. They are

often involving children, which adds another dimension to this very

difficult problem.

Likewise, I would like to acknowledge my belief that society is

well served by strong marriages and that society has an interest,

53

not in making the personal decisions about whether to marry or

whether or not to be married, but to help those who are to have

strong marriages. Children are healthier.

In our welfare circumstances, we find that if the families can be

preserved voluntarily because of assistance we have given, that is

a positive thing.

My wife and I did sponsor a commission called the Marriage

Commission. It was one of the first in America. Our purpose was

simply to make known the important social value that exists there

and the value that exists to children and to society generally in the

long term.

Senator BAUCUS. I appreciate that. I think everybody does. But

if you could, with a little more specificity, address the question of

forcing people to either marry or stay in a marriage where there

is domestic violence.

Mr. LEAVITT. I know of no public policy that I have been involved

in or that I would support that would disrupt the choices, the individual, personal choices of people. I do not know of any State where

that would be the case either.

Senator BAUCUS. I appreciate that. Thank you very much.

I would like to move now a bit to the so-called fall-back plans.

You are from a rural State, I am from a rural State. As you well

know, when we wrote the Medicare bill a lot of us from rural

States were very concerned that there will not be adequate drug

coverage in rural States compared with large States.

The earlier versions of the bill said there have to be at least two

so-called PDPs, or private plans. Then we said one could be a managed care plan. But then the question arose, what about those

parts of the country where there just is not a sufficient population

base to persuade a private plan to come in and want to serve?

So, what do we do about that? In the law, as you know, we said

that HHS/CMS has to come up with fall-back plans, where the government basically contracts with a single plan to provide the benefits.

Well, it is my understanding that the administration has not

done very much to develop the fall-back plans. In fact, to the degree they have, the standards are much tougher, which, in effect,

may mean that people in rural areas are going to have inferior

drug service under the bill.

I think I proposed a written question to you along these lines.

But if you could just give us your thoughts about that, please.

Mr. LEAVITT. First of all, I am aware in the bill of the requirement of a vibrant market being in every region of the country. We

will meet that obligation. I hope that we will need to use fall-back

plans in the fewest possible number of areas, but where we need

to, we will. We will assure that there is a market like the one described in the bill in every area. I am committed to that, and I

know the President is.

Senator BAUCUS. And do you know the degree to which fall-back

plans have been developed? After all, this goes into effect pretty

soon, about a year from now.

Mr. LEAVITT. I do not know with any certainty the degree to

which those are being contemplated. I can assure you that part of

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the success of this, I believe, is going to be assuring that we meet

that.

Senator BAUCUS. When you get confirmed, could you look at that,

please?

Mr. LEAVITT. I would be delighted to do that and report back to

you.

Senator BAUCUS. And just let me know how it is coming along.

It is really concerning. Montana is a State of over 145,000 square

miles, a lot of folks. Sometimes it is cold in the winter and it is

hard to travel. We just want to be assured that we are treated

equally.

Mr. LEAVITT. Yes.

Senator BAUCUS. And make sure that the regulations of the fallbacks are not more onerous or stringent compared with the other

PDPs.

Mr. LEAVITT. As you are aware, the rule that will define the requirements for the potential carriers is in the final stages of preparation. I have not seen that rule, therefore, the nature of the task

is still somewhat unknown to me, but the priority of it is not.

Senator BAUCUS. Mr. Leavitt, let me ask you about specialty hospitals. I am concerned about specialty hospitals. It would have been

interesting for you, being such a public policy person, to have been

in the room, in the conference, first of all on the drug benefit bill,

but, second, the time we spent on specialty hospitals and the

pitched battle between two conferees, one in the House and one in

the Senate, over specialty hospitals.

One said we must give specialty hospitals special privilege. The

other disagreed, because he believes they are skimming. They are

taking the best patients, the ones who pay more. And these facilities do not have to provide emergency care or other services that

most community hospitals must provide.

As you know, MEDPAC recently came out with a recommendation to extend the moratorium against building new specialty hospitals until 2007. What is the administration’s view on the

MEDPAC recommendation?

Mr. LEAVITT. That is actually a subject I am not able to add a

lot to. I am aware of the issue, generally. It is another one of those

that I need to bring myself up to speed on. I have not been involved

as governor, nor in my previous public policy discussions, directly

with specialty hospitals. I will look for conversations to understand

them, but I do not know now.

Senator BAUCUS. Whatever it is worth, when I am home I quiz

doctors about this. I ask them what they think. I must tell you, I

am surprised at the degree to which doctors think it is a bad idea,

these specialty hospitals, because they are getting such a better

deal compared with other doctors, other hospitals.

These doctors say it is just not fair. Here I am at this hospital,

I am a good doctor. I have talked to doctors that explain to me the

number of procedures they have and they are bringing revenue to

the hospital. They love their job.

But they think it is also their responsibility to be part of an organization that is providing full service, a full-service hospital. They

resent it—and I agree with them—that some of their colleagues

leave, go form a specialty hospital in which they have an equity inVerDate 11-MAY-2000 16:11 Nov 08, 2005 Jkt 095484 PO 00000 Frm 00062 Fmt 6633 Sfmt 6633 20932.000 SFINANC2 PsN: SFINANC2
55

terest—an orthopedic specialty hospital, or a cardiology specialty

hospital, or whatever it might be—and they do not have to provide

the other services.

MEDPAC, as I said, recommended extending the moratorium at

least until 2007, I assume for some of the same reasons I suggested. I urge you, when you are looking at this issue, to keep in

mind, it is just not fair, in my view.

Now, the other side of the coin is, there are specialty hospitals

that provide special service, and so on, and so forth. But I think

most people can get good care without having to go to a specialty

hospital.

Mr. LEAVITT. When I read the MEDPAC report, I will take some

care to learn that. It is an issue that is now more heightened in

my mind than it was before, but I am afraid I cannot respond to

you now.

Senator BAUCUS. While we are on MEDPAC, have you had a

chance to look at their recommendations with respect to Medicare

reimbursement?

Mr. LEAVITT. I have just read news reports of the most recent

one.

Senator BAUCUS. As you know, that is going to be a big-time

issue here.

Mr. LEAVITT. There is a long list, I am afraid, with those.

Senator BAUCUS. I know it is long. It is.

The CHAIRMAN. What he said is an issue, because on June 30

that moratorium runs out. So, that is something that Congress, if

we decide to keep the moratorium, will have to be dealing with this

year. You said you didn’t understand it.

I think the simple way to respond to it is, the Wall Street Journal point of view, that you ought to have these specialty hospitals

because it gives the marketplace an opportunity to work, and people have more choice.

But the rural point of view is that it is going to skim off doctors

and income from hospitals that are forced to take anybody, and

with the loss of the expertise and the revenue, it is going to be very

difficult to deliver quality care in rural America. Is that fair to say?

Senator BAUCUS. Yes. That is a large part of it. It is not just

rural.

The CHAIRMAN. I suppose I always think in terms of rural because we have been getting screwed for the last 20 years on these

formulas.

Senator BAUCUS. But you are changing that.

The CHAIRMAN. Well, we have.

Senator BAUCUS. Yes.

The CHAIRMAN. But it could be a problem, particularly in the

poor parts of urban America as well.

Senator BAUCUS. Just a couple of quick questions here. One, is

on the cancer reimbursement. I am sure you know the issue. What

I hear, and I do not think this is self-serving, is that the reimbursement—the new rules—with respect to rural doctors are more onerous than they are for non-rural cancer practitioners. That is, the

reimbursement for the drugs versus the administrative practices

reimbursement. I would just like you to please look into that.

56

You will not believe, I get tons of e-mails. That is a little strong.

I get an awful lot of e-mails from Montana oncologists on this very

point. Just like in Utah, we all trust each other in Montana. So I

figure that these folks, they are not putting one over on me. I know

these people. They are honest, good, decent folks. There must be

a kernel of truth in what they are saying.

Mr. LEAVITT. Thank you. I will.

Senator BAUCUS. Second, I do not know if this is discussed a lot,

but I think this is really key for the future. We have a huge opportunity, and also a responsibility, in my view, to develop very aggressive new programs to address quality of care in America.

The health care industry is so inefficient. There is room for so

much more improvement in this area. There is so much paperwork.

Even those with IT systems do not talk to each other. It is a mess.

We waste so much time. I know that the administration’s budget

talks about dollars for IT, but it is spread out over much too long

a period of time, in my view.

I would urge you to go back and look at the IT budget and see

if there is a way to address giving that a real kick to get it moving,

because right now the talk is maybe about 10 years. We cannot

wait that long.

Also, for the sake of competitiveness. We are spending so much,

as I mentioned earlier in my opening statement, on health care

costs in this country that need not be spent and have nothing to

do with health care, and in fact diminish the quality of health care

because of the inefficiencies.

It gets to the question of just what hospitals and providers can

do locally. I was talking to one fellow who told me they have

brought death by infection down to zero—zero—just by instituting

different steps in the hospital, particularly infection control procedures to reduce infections caused by catheters and so forth. They

have done it with all kinds of little things, for example, making

sure people are properly gloved.

And visually. They have taken a page out of Toyota’s notebook,

because Toyota has learned that much of quality control is visual.

For example, they put stripes around dangerous areas so people

see it.

They put index cards with stripes so they know when the gloves

inventory is low. Once you have old gloves, they do not work. That

is why doctors do not use them, because they do not have the right

gloves when they walk into a room.

A lot of this can start at the top, but a lot of it has to be done

at local hospitals. This could help address the Medicaid and Medicare cost problems. Really, it is just axiomatic.

Mr. LEAVITT. I see it as among the, first of all, areas of my greatest interest, and second of all, an area where the Department can

have great impact on the overall——

Senator BAUCUS. Huge. Huge.

Mr. LEAVITT [continuing]. Of the overall health——

Senator BAUCUS. And part of it is organizing business. The BRT,

the Business Round Table, has a huge interest in this because they

have got to get their health costs down.

Mr. LEAVITT. Right.

57

Senator BAUCUS. You can use them as sort of pilot projects, get

them going in some companies. I suggest you get a team of industrial engineers and some CPAs and go, say, 5, 6, 8 months to some

hospitals that are doing this, or not doing it, to see how much they

can do to get costs down, because the current incentives just do not

work that way. They work the wrong way.

When you do that, you are going to find huge potential savings,

which will give you clues as to how to begin to work in changing

the incentives. You are the guy. You are the man.

Mr. LEAVITT. It is an opportunity that I find great anticipation

on.

Senator BAUCUS. I can give you the names of people that I urge

you to talk with, with whom I have been speaking. It is clear. We

should be reimbursing based on outcomes, quality outcomes, not

just on service.

Mr. LEAVITT. Back in my home State, we have one health care

system called Inter-Mountain Health Care, which you are probably

familiar with. They have some services in Montana. But they have

begun to look for the quality quotient in everything they do.

In fact, yesterday, during the hearing, Senator Kennedy showed

charts from this hospital organization on how they had been able

to reduce infections inside hospitals by being able to modify the

treatment regiments.

Senator BAUCUS. And do you know the cost of infections? It is a

hugely expensive cost.

Mr. LEAVITT. It is prevention.

Senator BAUCUS. It is prevention.

One last question. That is, the dual eligible transition. I have

heard a lot of concerns at home from a lot of folks who fear that

they are not going to be able to choose what kind of plan makes

sense for them, particularly in areas where there is no managed

care. They do not know what automatic enrollment means.

I urge you to get started now to get that thing in place so we

do not have to hurry up and catch up at the end of the year when

the dual eligible issue is going to otherwise come to a head.

Mr. LEAVITT. I am quite sensitized to this, and have become

more today as I have heard Senators comment.

Senator BAUCUS. I will tell you, at home this is a real concern.

What are we talking about here? We are talking about vulnerable

seniors, older people. They are poorer. They will have a harder

time knowing where to go to get a plan, to get their drug plan.

Some are disabled, some have mental impairments. This is a group

of people that needs some extra help.

Mr. LEAVITT. As you know from our previous conversations, our

objective at this point is to make certain that a decision is made

in the best possible way, and then use lots of flexibility and many

opportunities to try to bring them one at a time to make sure we

have made the right decision for them.

Senator BAUCUS. Mr. Chairman, I have no more questions.

Mr. Leavitt, I think you are going to be a great Secretary.

Mr. LEAVITT. Thank you.

Senator BAUCUS. Great.

Mr. LEAVITT. I look forward to working with you, Senator.

Senator BAUCUS. You are going to be a great Secretary.

58

Mr. LEAVITT. Thank you.

Senator BAUCUS. And I want to thank you, Mr. Chairman, for indulging all of my questions.

The CHAIRMAN. Yes.

Senator Wyden?

Senator WYDEN. Mr. Chairman, I came back because I was under

the impression we were going to vote the nominee out. What is

your pleasure?

The CHAIRMAN. My pleasure is to adjourn, because we cannot get

a quorum. My intention is, in consultation with Senator Baucus, to

do this either on the floor or next week when we convene a committee meeting here to do our organization, one or the other,

whichever is the quickest that can be done.

Senator WYDEN. Mr. Chairman, you have been very generous to

me. I would ask, then, if I could submit a couple of additional questions to the nominee in writing. It is my intention to support the

nominee.

The CHAIRMAN. Yes. Thank you very much.

[The questions appear in the appendix.]

The CHAIRMAN. I have said what I need to say for closing. The

inability to get a quorum will carry this over until Monday or Tuesday of next week. It is my intention of working very quickly to get

your nomination out of committee.

Mr. LEAVITT. Thank you, Senator.

Senator BAUCUS. And mine, too, Mr. Chairman. I think it is very

important.

The CHAIRMAN. Yes. Yes. Well, if it can be done sooner, as there

was discussion here, we will do it just as soon as we can.

Senator BAUCUS. Right.

Senator HATCH. If we have votes tomorrow, we might be able to

hold a quorum.

Mr. LEAVITT. Thank you very much, Senator.

[Whereupon, at 5:25 p.m., the hearing was concluded.]

(59)

A P P E N D I X

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

PREPARED STATEMENT OF HON. JIM BUNNING

Thank you, Mr. Chairman, for holding this important hearing today.

Today we have before us Governor Michael Leavitt, who has been nominated to

be the Secretary of the Department of Health and Human Services. I appreciate the

time you have taken to be here today, and I hope we can move your nomination

through the Senate quickly.

The secretary of HHS has a tremendous responsibility in running a Federal agency that touches the lives of millions of Americans on an almost daily basis. The secretary is responsible for overseeing the benefits for about 40 million Medicare beneficiaries along with coordinating benefits with States for about 40 million Medicaid

beneficiaries.

The secretary also oversees the important research work conducted by the National Institutes of Health, along with running programs ranging from preventing

AIDS to establishing community health centers to training nurses. Just as importantly, the secretary of HHS has an important role to play in being ready to respond

to a terrorist attack, including overseeing research and coordinating with States and

local governments to make sure everyone is prepared.

Governor Leavitt has an impressive background—running the State of Utah for

11 years, serving as chairman of the National Governor’s Association, heading up

the environmental protection agency and serving as a member of the President’s

homeland security advisory council.

I look forward to hearing from Governor Leavitt today about how he plans on

meeting the challenges facing the Department of Health and Human Services in the

coming years. It won’t always be an easy job, but being secretary will give you an

opportunity to shape the future of health care in this country for years to come.

Thank you.

PREPARED STATEMENT OF HON. CHARLES E. GRASSLEY

Governor Leavitt, welcome. First, I would like to take this opportunity to thank

Secretary Thompson for his devoted public service over the past 4 years. During his

tenure Secretary Thompson successfully led the Department through the September

11th tragedy and the flu vaccine shortage.

He was also instrumental in passage of the Medicare Modernization Act of 2003

and has successfully completed 200 regulations on time with 27 pending publication,

a difficult task that will continue into 2005.

Looking back at these past events and looking forward to the new challenges that

await us, it is most fitting that we start the first health care hearing of the 109th

Congress with Governor Leavitt’s nomination.

During his tenure as governor, he reduced the number of uninsured children

through his work on the Children’s Health Insurance Program and significantly increased the number of those with health insurance coverage by 400,000. He improved immunization rates by nearly 75 percent and made significant improvements

to the child welfare system.

I am certainly not alone in my high estimation of Governor Leavitt. The people

of Utah recognized his strong leadership capabilities by re-electing him for three

consecutive terms as Governor.

60

Certainly, big challenges lie ahead for this department, and strong leadership is

needed. First and foremost, there are an estimated 45 million Americans who lack

basic health coverage.

Each year, the ranks of the uninsured increase. As Secretary, your leadership will

be called upon to propose innovative ways that we can help contain costs and increase access to health care. This is surely one of the biggest health care challenges

of our time.

The Medicaid program is the key Federal program for providing health care access to low-income individuals and families. It is now the largest Federal health

care program in terms of total spending, and it served about 51 million people in

2002. Yet it was originally enacted in 1965, and many have suggested that it has

not kept up with today’s challenges.

Increasingly, States have been forced to rely upon the 1115 waiver process to

manage the program, and these waivers are negotiated with little Congressional

oversight.

I look forward to working with Governor Leavitt to ensure that Medicaid is functioning as effectively as it should be.

Since 2003, the GAO has ranked Medicaid among its ‘‘high risk’’ programs. I hope

Governor Leavitt is as surprised as I was to learn that CMS allocates only eight

full-time employees to Medicaid program integrity. Congress and the Agency need

additional oversight of the Medicaid payment error rate. Medicaid dollars lost to

fraud, waste, and abuse must be saved and directed to the millions of low-income

Americans who need them.

On the issue of SCHIP, $1.1 billion in SCHIP allotments expired last year and

were returned to the treasury. In addition, there are anywhere from 4 to 6 million

children who are uninsured, despite being eligible for coverage under SCHIP or

Medicaid.

And over the next 3 years, a growing number of States, including my State of

Iowa, are projected to consume their Federal SCHIP allotments, and when this happens they will lack the Federal funds necessary to provide their current level of

SCHIP coverage and benefits. We need to recapture the $1.1 billion in SCHIP funds, increase our outreach efforts to enroll more children, and we need to revitalize the SCHIP program so that

it is on firm financial footing.

Finally, we need to enact improvements to the 1996 welfare reform bill. We have

debated this issue now for over 3 years. It is time for action. The numerous shortterm extensions are disruptive to the program, and I look forward to working with

you, Governor Leavitt, to get a welfare bill sent to the President this year.

The Department also has the important job of implementing the new Medicare

prescription drug benefit. Under Dr. McClellan’s leadership, the Centers for Medicare and Medicaid Services have accomplished an impressive workload over the last

year.

Dr. McClellan and the staff at CMS are to be commended for their long hours,

hard work, and dedication. This is a crucial year for the drug benefit, and I look

forward to working with you in this area as well.

Medicare still faces significant challenges to be sure. Medicare spending grew by

5.7 percent in 2003, and as spending continues to increase there is a growing need

to restrain its growth.

Many have said rising costs in health care can be contained and health care quality improved by paying providers based on their performance and by utilizing health

information technology.

The Department has taken significant steps to reduce health care costs and provide better care through chronic care management initiatives and additional preventive benefits, like the initial ‘‘Welcome to Medicare’’ physical and screenings to detect heart disease and diabetes that were added by the Medicare Modernization Act.

The Department also called upon Dr. Brailer, as the National Coordinator for

Health Information Technology, to develop, maintain, and oversee a plan focused on

the nationwide adoption of health IT in both the public and private sector.

Bringing these initiatives together to reward quality and efficiency while reducing

medical errors and duplication will be one of the major undertakings in health care

over the next decade, and strong leadership at HHS is needed to help make it happen.

Another issue on which your leadership is needed is the importation of prescription drugs from Canada and other developed nations. American consumers are demanding lower prices on prescription drugs, and I believe that legalizing importation under conditions that ensure safety is the right thing to do.

I look forward to working with my colleagues on both sides of the aisle to craft

legislation that will pass Congress and be signed into law by the President.

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Finally, I would also be remiss if I did not address an issue that continues to be

of great concern. Governor, the frail and the elderly residing in our Nation’s nursing

homes deserve high quality care. I am confident that I can rely on you to work hand

in hand with me to ensure that they receive no less.

Besides these issues, the Department faces other significant challenges. I have always taken the responsibility of conducting oversight of the Executive Branch’s operations very seriously, and I have and will continue to do so as Chairman of the

Finance Committee.

Government truly is the people’s business, and Americans have a right to know

what their government is doing and how it spends their money. Transparency in

government coupled with aggressive oversight is critically important in helping to

make government more transparent, more effective, more efficient and more accountable to taxpayers, program participants, and beneficiaries.

In that regard, I am a firm and ardent supporter of whistleblowers. Historically,

whistleblowers have been the key to uncovering waste, fraud and abuse. Unfortunately, whistleblowers are often as welcome as a skunk at a picnic.

As the nominee to be Secretary of the Department, you will be responsible for the

Food and Drug Administration, the Centers for Disease Control and Prevention, and

the National Institutes of Heath, among others. Unfortunately, a number of serious

and potentially life-threatening problems have come to light at these agencies, in

large part thanks to whistleblowers.

In particular, the FDA has come under increasing scrutiny on issues of drug safety. Governor Leavitt, it will require your strong leadership to make the FDA more

transparent and to restore the public trust. Scientists working in that office are not

to be muzzled and overcome by the pressures placed on them by other offices at the

FDA. The American people deserve to know their drugs are safe.

A number of individuals have blown the whistle at the FDA. These patriotic

Americans are scared that if they tell the truth, they will suffer retaliation at the

hands of senior officials.

With that in mind, Governor Leavitt, I want your public assurance that anyone

who exposes problems at your Department will have their rights as Federal employees fully respected and will be permitted to speak with this Committee or any member of Congress without fear of reprisal. You understand that I need employees at

the Department to hear you because I know that they are listening. I look forward

to addressing these problems with you.

It is my hope that the Finance Committee will work closely with Governor Leavitt

to address some difficult issues that affect millions of Americans.

Taking a closer look at Medicaid and SCHIP improvements, implementation of

the new Medicare drug benefit, importation of prescription drugs, enactment of welfare reform, and the advancement of information technology and quality in health

care are just some of the priorities I look forward to addressing with Governor

Leavitt and my fellow colleagues.

Let me close by thanking Governor Leavitt for his willingness to serve as Secretary for the Department of Health and Human Services. It is a major commitment

that requires personal sacrifices on many levels.

I would also like to thank President Bush in his choice of such a qualified and

competent candidate.

Thank you.

PREPARED STATEMENT OF HON. JAMES M. JEFFORDS

Mr. Chairman, I want to add my voice to those of our colleagues welcoming Governor Leavitt before the Senate Finance Committee today. As I told Governor

Leavitt when he and I met last week, I intend to vote to confirm the Governor to

be the Secretary of the Department of Health and Human Services, but I appreciate

this opportunity to raise a few issues particularly important to the Finance Committee. I will also submit a few questions to the Governor for the record.

Governor, in addition to the Finance Committee, I also have the privilege of serving, along with Senator Bingaman and Senator Frist, on the Senate HELP Committee. I believe that taken together, these two committees share jurisdiction over

every program at HHS. We are all aware of just how important these programs are

to the health and well-being of all Americans—so I am pleased that we are acting

quickly on your nomination.

I was glad to read your praise of Tommy Thompson in your opening statement,

and I join you in saluting his stewardship of HHS. Although we didn’t always see

eye-to-eye on every issue, we were able to reach agreement on many matters important to our citizen’s health and well-being.

62

In the area of health policy, I suspect that you and I will have more views in common than we have had in your current position, and I am looking forward to having

a much more collaborative working relationship with you. Let me mention a few

areas with which I have significant concerns.

As a supporter of the recent Medicare legislation, I was glad to learn of your commitment to those provisions most helpful to rural beneficiaries and providers as well

as the provisions guaranteeing the prescription drug benefit. I’m especially concerned that rural States like Vermont and Utah have access to competitive plans

so that rural Medicare beneficiaries can benefit from lower, competitive prices.

In a related area, I believe that one of your most noteworthy responsibilities will

be as a trustee to the fiduciary solvency of the Medicare trust fund. In that vein,

I would urge you to look closely at the ability of the Department to help facilitate

the opening of international trade markets for prescription drugs and to reexamine

the extent to which direct price negotiation between the Secretary and prescription

drug manufacturers could help reduce the expense of drugs to the Medicare and

Medicaid programs.

I am also significantly concerned about Medicaid funding and the specter of limits

on the Federal obligation to the medically underserved. I know that the governors,

including Governor Douglas in Vermont, would like to have greater flexibility in

providing Medicaid benefits, and that is something I believe we can work with. But

frankly, I am wary of the Administration’s proposal to provide States with the flexibility to ‘‘expand access’’ at the same time it is proposing to cap and block-grant the

Federal contribution to the States.

Another issue that we need to address in the coming months is welfare reform.

You played an important role in the welfare reform of 1996, working in a bipartisan

fashion with President Clinton and members of Congress to produce historic legislation. The significant flexibility yielded to the States in that law has yielded largely

positive results. The last couple of years, we have been struggling to develop a new

welfare authorization, and I am looking forward to working with you to help the

States build upon and improve what has been done since 1996.

Welcome back to the debate, Governor, and I look forward to hearing your testimony and your plans for the Department of Health and Human Services.

PREPARED STATEMENT OF HON. MICHAEL O. LEAVITT

Good morning. Mr. Chairman, Senator Baucus, and members of this Committee:

Thank you for inviting me to discuss my nomination to be Secretary of Health and

Human Services.

I would like to begin by expressing my immense admiration for Tommy Thompson. We have been friends for many years, but my admiration is broader than just

friendship. I admired his leadership as governor of Wisconsin. The two of us worked

together on many of the issues we will talk about today. He also brought an aggressive agenda to HHS, and his 4 years at the helm have made America healthier and

safer.

Consider: Medicare is providing more comprehensive care to more American seniors than ever before. HHS is better prepared than ever to respond to public health

emergencies. More children receive immunizations and health care, and fewer use

drugs. The Food and Drug Administration is inspecting seven times as much imported food as it did 4 years ago. And, thanks to the leadership of President Bush

and Secretary Thompson, the United States leads the struggle against AIDS around

the world.

Tommy has earned the affection and respect of the people of HHS, and I pledge

to him and to you that, if confirmed, I will build on his legacy.

I have enjoyed every stage in my career, from business, to being governor of Utah,

to protecting the environment as Administrator of EPA. Now, President Bush has

asked you to confirm me as Secretary of Health and Human Services. I want to

thank him for his confidence and thank you for assessing my fitness to serve.

As a prelude to answering your questions, it may be helpful if I tell you what I

believe, what issues and opportunities I see confronting our Nation, and how I view

the Department of Health and Human Services.

I believe conducting the public’s business is a sacred trust. I pledge that I will

serve with fidelity and full effort.

I believe collaboration trumps polarization every time and that solutions to complex problems have to transcend political boundaries.

I believe that information technology is challenging old institutions, bridging

great distances, and giving people more control over their own lives. To survive, governments will have to be more flexible and more competitive.

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I believe market forces are superior to mandates. People do more, and do it faster,

when they have an incentive to do the right thing.

I believe we should reward results, not efforts. Our focus should always be the

outcomes we are striving to achieve.

I believe that to change a nation, you have to change hearts. And you change

hearts through education and example.

I believe government must care for the truly needy and foster self-reliance and

personal charity. Helping others is good for the soul. Government can augment this

compassion and provide services, but it can never replace the love that makes us

help each other.

I expect the Department of Health and Human Services to achieve our Nation’s

noblest human aspirations for safety, compassion, and trust.

When we gather our families for dinner at night, we rely on HHS to ensure the

food we put on the table is safe.

When we are alone at night caring for a sick child, we trust HHS to ensure that

the medicine we give her is effective.

Our poor, disabled, and elderly have health insurance because this Nation has

made it a priority; another powerful stewardship that has been given to HHS.

The Department of Health and Human Services helps to strengthen marriages

and families, protects children, and fights disease. For example, we are often called

upon to protect neglected and abused children. But we can never replace the love

of a parent.

And if, God forbid, terrorists should ever unleash a biological agent on American

soil, we would rely on the dedicated men and women of HHS and the plans they

have developed already to stop the disease in its tracks and protect Americans.

We all know that HHS spends nearly one out of every four dollars collected by

the Federal government in taxes. I am humbled by the prospect of shouldering that

responsibility.

I would like to thank the members of this Committee for the kindness you showed

me as I visited your offices. Our conversations have been helpful as I contemplate

this task. One of you said, only partly joking, ‘‘Why would you want a hard job like

that?’’ There are so many reasons. Let me mention a few, beginning with welfare

and Medicaid.

WELFARE REFORM

In the late 1990s, in my role as Chairman of the National Governors Association,

I worked closely with Congress and other governors in building the Federal-State

partnership we called welfare reform. We can all be proud of this dramatic American success story. We set a tone of compassion for this country by caring for those

in need and fostering self-reliance. Now I look forward to working with you to ensure that welfare reform is reauthorized and improved.

MEDICAID

During the same period, Congress worked hard at reforming Medicaid, but ultimately failed. I vowed then that if the opportunity ever arose again, I would seize

it. Delivering health care to the needy is important, but Medicaid is flawed and inefficient. We can do better. We can expand access to medical insurance to more people

by creating flexibility for our State partners and transforming the way we deliver

it.

MEDICARE

When you and your colleagues approved the Medicare Modernization Act, Mr.

Chairman, that was a great achievement. And you asked us to implement the Medicare prescription drug benefit on January 1, 2006. This is a great challenge.

I have no illusions about the size of the task. It is immense. But I recognize that

the President and the Congress made a solemn commitment to America’s seniors.

I have the responsibility of delivering on that commitment. Our work will not be

without flaw, but we will not fail.

GLOBAL

This Nation’s compassion is not limited to America. We live in a prosperous country. And our prosperity is not only a blessing—it’s also an obligation. While the

world sometimes envies or resents us, it always respects us. And when we do the

right thing, others emulate our example.

In international health, one of our Nation’s greatest strengths is our considerable

convening power—it’s our ability to inspire, to set an example, and to call upon the

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best knowledge, experience, and resources, from individual experts, private institutions, and government agencies.

I resolve to use this convening power to meet our obligation as human beings to

improve health and well-being. We will reach out to reduce suffering, to promote

understanding, and to inspire compassionate action.

FDA, NIH, AND CDC BRANDS

HHS is the trustee for a number of our Nation’s most treasured brands. A brand

is a promise. Over decades, the dedicated scientists and researchers of HHS have

earned the public’s trust, especially in three brands: FDA, NIH, and CDC. To millions of people, these brands are seals of quality, safety, and best in the world research. If they lost their reputations, they would take years to recover. HHS always

needs to keep in mind the ethical implications of its decisions, to ensure that Americans can be proud, not only of the Department’s scientific expertise, but also of the

moral judgment of its leaders.

At FDA, our goal must be to inform consumers about risks and benefits. Our foundation must be sound science. Our motto must be independence.

At NIH, we must march forward with life-saving research, and always hold the

scientists, universities, and laboratories accountable for results.

At CDC, our guiding focus must be disease prevention and control, sharing generously the best health and safety information in the world.

LIABILITY

Most doctors make a sincere effort to do a good job, but medical errors do occur.

People who are harmed by medical errors absolutely deserve prompt and fair compensation. Unfortunately, the capricious liability system that prevails in many

States helps no one. Senators, I look forward to working with you to pass comprehensive medical liability reform.

TWENTY-FIRST CENTURY HEALTH CARE

Most broadly, Americans deserve the health care of the twenty-first century.

We’ve earned it. That includes modern medical technology. Modern information

technology. And modern, consumer-focused delivery systems.

I see a world that is rapidly moving toward personalized medicine. People will

own their own health savings, health insurance, and health records.

I see a world in which a doctor can write a prescription on a handheld device and

transmit it to the patient’s pharmacist, who can start filling it before the patient

leaves the doctor’s parking lot—and with less chance of error or delay.

I see a world where doctors heal our loved ones when they are sick, but focus

more of their energies on keeping them well in the first place.

I see a world where good health care makes America more productive, not less

competitive.

And I see a world where premier health research serves the betterment of mankind.

CONCLUSION

Mr. Chairman, I have always had three goals in public service. I followed them

as governor of Utah. I’ve followed them as Administrator of EPA. And I will follow

them as Secretary of Health and Human Services.

The first goal is to leave things better than I found them. The second goal is to

plant seeds for future generations. And the third goal is to give it all I have.

I promise to work with this committee in a responsive and transparent manner

so we can do just that.

Thank you for your attention, Mr. Chairman. I look forward to answering your

questions.

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PREPARED STATEMENT OF HON. BLANCHE L. LINCOLN

I am pleased to consider the President’s nomination of former Governor Michael

Leavitt to be Secretary of Health and Human Services (HHS). As Secretary, he will

face an enormous task—overseeing the implementation of the Medicare Prescription

Drug Improvement and Modernization Act of 2003 (MMA). He will also oversee

Medicaid, the Federal-State program which provides medical and long-term care

services for millions of low-income families and individuals, especially our elderly

in nursing homes.

The MMA, which I supported, establishes a Medicare prescription drug benefit

program, providing seniors and individuals with disabilities with long overdue prescription drug coverage starting on January 1, 2006. The success of this new program depends upon the work of the Center for Medicare and Medicaid Services

(CMS) not only this year, but throughout the implementation process.

This year is a historic one for Medicare beneficiaries. Beginning on November 15,

2005, all Medicare beneficiaries will be given the opportunity to enroll in a Medicare

drug benefit. It is critical that we use the time between now and then to educate

current and future beneficiaries about this complex benefit and other changes in the

Medicare program.

I and many others have been disappointed in the low enrollment in the Medicare

drug discount card. December 8, 2004 was the one-year anniversary of the MMA

becoming law, and the news was not good. In 2004, only 1.5 million low-income

Medicare beneficiaries enrolled in a drug discount card (which has $1,200 worth of

direct subsidy for drugs for people under 135 percent of poverty) out of the estimated 7.1 million people eligible. That means that 5.6 million people essentially left

$600 on the table in 2004. In 2004, only 5.8 million Medicare beneficiaries nationwide enrolled in a drug discount card out of the approximately 40 million beneficiaries eligible. Most of these beneficiaries were signed up automatically through

a Medicare managed care plan, which we do not have in Arkansas.

Given the low enrollment in the drug discount card and the fact that many beneficiaries do not even know that a Medicare drug benefit was passed into law, I do

not have high confidence that many beneficiaries will be enrolled in a drug benefit

by the time the enrollment period ends and premium penalties start to apply on

May 15, 2006.

It is critical that CMS and its partners, like the Access to Benefits Coalition, work

hard to inform current beneficiaries that premium penalties will apply after May

15, 2006 if they fail to sign up for a drug plan. I believe Congress should consider

extending this deadline, particularly for low-income beneficiaries, who are often

harder to reach.

I also believe that CMS should exercise the authority it has and automatically enroll participants in the Medicare Savings Program in a drug benefit plan if they fail

to enroll in one themselves, an authority they will exercise for those beneficiaries

who participate in both Medicare and Medicaid (the so-called ‘‘dual eligibles’’). Only

about 7 million beneficiaries will be automatically enrolled in the low-income subsidy out of the estimated 14.1 million beneficiaries who are eligible for it. This generous low-income assistance, which will pay for between 85 to 100 percent of prescription drug costs, is largely the reason why I supported the MMA. It is estimated

that almost half of the Medicare beneficiaries in Arkansas will qualify for the lowincome benefit. It is absolutely critical that we find all these people and enroll them.

Arkansans have much to gain by this new law, if we can only reach them.

I have often been impressed by the fact that Medicare beneficiaries consistently

describe Medicare as a ‘‘lifeline.’’ While the program remains popular, the recent

changes in Medicare have caused much confusion, and the drug discount card has

eroded some faith in Medicare. I am concerned that the General Accountability Office found that callers to the 1–800–MEDICARE help line got accurate answers only

61 percent of the time. Of the remainder, 29 percent were given erroneous or incomplete information, and 10 percent of the calls weren’t answered at all, as callers

were disconnected. I hope that CMS will learn from its experiences with the drug

discount card. Seniors and their families need to have confidence in the new Medicare drug program—it is vital to its success.

In addition to Medicare, Medicaid is a critically important program to Arkansans.

Nationwide, Medicaid finances services for over one in three births; over one in four

children; one in five of all non-elderly individuals with specific, chronic disabilities;

and two in three residents in nursing homes. In Arkansas, half of the births are

financed by Medicaid. Providing coverage for 50 million individuals, Medicaid is a

crucial safety net that many Americans rely on for health care and long-term care.

I am concerned that any arbitrary caps on funding for this program will negatively

impact the health care these Americans currently receive.

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I would like to share a quote with all of you. ‘‘To balance the Federal budget off

the backs of the poorest people in the country is simply unacceptable. You don’t pull

the feeding tubes from people. You don’t pull the wheelchair out from under the

child with muscular dystrophy.’’ This is a direct quote from Arkansas’ Governor

Mike Huckabee in response to potential Medicaid funding cuts in the President’s

budget. I couldn’t say it better myself.

States all over the country are being impacted by decreased revenues and are

being forced to make tough choices. At the same time, enrollment in Medicaid is

increasing. In fact, compared to other States, enrollment in Medicaid in Arkansas

is growing at one of the fastest rates. Monthly Medicaid enrollment grew by 9.6 percent from June 2002 to June 2003, while the national average was 5.9 percent. I

am concerned that budget cuts will exacerbate this already difficult situation, and

I look forward to working with the Administration to ensure that this important

safety net is not jeopardized.

PREPARED STATEMENT OF HON. TRENT LOTT

Good afternoon. I’d like to thank Chairman Grassley for chairing this hearing,

and Governor Leavitt for appearing before the Committee to discuss his nomination

to be the new Secretary of HHS.

Governor Leavitt, I would like to congratulate you on both your nomination to be

Secretary of HHS and also your past accomplishments as governor of Utah, and as

administrator of the EPA. Under your leadership Utah was named the ‘‘best managed State in America’’ and the ‘‘best place to locate a business.’’ You successfully

led the reduction of income, sales, and property taxes while serving in office.

However, a more pertinent example of your leadership while governor was made

evident by the extension of the Medicaid plan to cover 25,000 more Utahns without

any additional State costs. This accomplishment was done with the help of a waiver

from HHS; this waiver was the first of its kind under the Bush administration’s

Health Insurance Flexibility Initiative to trim Medicaid coverage for optional beneficiaries in order to extend benefits to more people. This strategy was based on the

ability to provide basic health care to many Utahns rather than unlimited health

care to a few.

You were also very helpful to us when we passed important reforms to our welfare

laws in 1996. The end result of that bill has been a decrease by about 50 percent

of the Nation’s welfare roles, and a large savings on behalf of the government.

Finally, you and I have discussed an issue important to me regarding Singing

River Hospital in Pascagoula, Mississippi. Based upon our conversation, I am confident that you will work with me to find creative solutions for the problems facing

Singing River due to the 2002 census reclassification.

I am certain that you will continue to be a strong and innovative leader for the

Department of Health and Human Services. I look forward to working with you as

Secretary, and congratulate you for your nomination.

PREPARED STATEMENT OF HON. GORDON H. SMITH

Thank you, Mr. Chairman, for hosting today’s hearing to discuss Administrator

Michael Leavitt’s nomination to become Secretary of the Department of Health and

Human Services. As we begin the new Congress, I am pleased to know that the Department will continue to rest in very capable hands.

First, let me say what a pleasure it is to see you again, Governor Leavitt. I enjoyed the conversation we had before the Christmas holidays and am confident you

will make an outstanding Secretary of Health and Human Services. Given your experience as the governor of Utah for 8 years, I am confident that you will be able

to take the helm of the Department and continue to guide it through this very challenging, but exciting time.

As you are well aware, many cornerstone issues exist for the agency and in fact

our country—establishment of the new Medicare prescription drug benefit, improvement and stabilization of the Medicaid program, oversight and possible restructuring of the Food and Drug Administration. Alone any one of these issues would

be a challenge, but facing all at the same time certainly will keep us busy and demand a concerted effort to ensure all are done properly.

The Finance Committee has a storied history of working with the Department.

We work together to help oversee the programs for which this Committee has jurisdiction, including Medicare, Medicaid, SCHIP, child welfare, TANF and disability

issues to name just a few. We must work with the Secretary to ensure that the inVerDate 11-MAY-2000 16:11 Nov 08, 2005 Jkt 095484 PO 00000 Frm 00360 Fmt 6601 Sfmt 6621 20932.000 SFINANC2 PsN: SFINANC2
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tentions of the Congress are in fact carried out by the agency staff. I am confident

a strong working relationship will continue and look forward to working with you.

The first challenge that I believe you will face as the new Secretary is creation

of the Medicare prescription drug benefit. I think it is safe to say that the agency

was put on a very short timeline to roll-out such a major benefit. In fact, the bill

we passed in 2003 was the largest single expansion of the Medicare program since

its creation. While good progress has been made, I am especially concerned that the

transition of the so-called dual eligibles be seamless. Over 6.1 million Americans

who are our poorest, sickest and most vulnerable are categorized as dual-eligibles.

They are the people residing in nursing homes, living with chronic diseases such

as mental illness, HIV-AIDS, diabetes, and persons with disabilities. However, to

their family they are just loved ones who need extra assistance to remain healthy

and alive. We must expend additional resources to determine if it is possible to enroll everyone in an appropriate drug program by January 1, 2006. If this isn’t possible, we must create a contingency plan to allow a temporary Medicaid benefit to

bridge the gap. I look forward to working with you to see that this happens.

As the largest single source of long-term care, Medicaid plays a singular role in

helping the elderly and disabled. While most experts agree that the least restrictive

setting is the best setting to deliver assistance, the Medicaid program remains outof-date because of its bias toward placing people in institutional settings. I have a

bill called ‘‘Money Follows the Person’’ that would help States remove this bias by

allowing both Federal and State Medicaid funding to ‘‘follow’’ people into the least

restrictive, most appropriate setting. This bill is modeled after the President’s New

Freedom Initiative, and I am hopeful that as the new Secretary you will personally

help champion its adoption into law.

Now, if I may, I’d like to talk about an issue that doesn’t fall under Finance’s jurisdiction, but is important nonetheless. I’m talking about mental illness. Most are

aware that with the strong support of the President I was able to see the Garrett

Lee Smith Memorial Act signed into law on October 21. It was a momentous occasion for Sharon and me, yet we know that the battle isn’t yet won. We have many

challenges ahead. The first is securing full funding for the Act. I understand that

the President’s budget because of timing problems—the bill became law after HHS

completed its budget—may not include a fiscal year 2006 funding request. I look forward to working with you to remedy that oversight and secure full funding—$27

million—from the appropriations process.

With passage of Garrett’s bill comes an opportunity to do even more to help persons with mental illness. We must enact mental health parity legislation this year.

I have committed that I will champion this cause with its leaders, Senators Domenici and Kennedy. No longer can insurance companies treat mental illness differently

than physical illnesses. I could no more tell Garrett to buck-up and be happy than

I could tell a diabetic to produce insulin. His bipolar disorder was as lethal to him

as cancer is to a leukemia patient. This bill must be passed, and now is the time

for the President to exert pressure on the House of Representatives to see that it

happens.

Another important challenge is the long-term financing of Medicaid. I know much

has been said about balancing the budget, and I support those efforts because it is

good for our economy; however, it cannot come on the backs of the poor, disabled

and aged. Senator Bingaman and I have a bill that calls for the creation of a Medicaid Commission so that Federal, State and local officials can debate the issues and

make recommendations about the future course of this program. Medicaid has

served our country well for 40 years, now we must determine its future. Governor

Leavitt, I hope you will champion this bill.

While the next two issues unfortunately are left over from the previous Congress,

nevertheless they require your focused attention—reauthorization of TANF and extension of SCHIP funding. States have continued to operate under temporary extensions of the TANF program since 2002. Needless to say, this has put a great burden

on States; I know I have heard about it from my State of Oregon. The uncertainty

has limited States’ ability to try innovative solutions, and coming at a time when

the economy took a downturn has added additional stress. Oregon has a unique and

very effective program that helps hard-to-employ people establish a solid foundation

before entering the workforce. I hope as Secretary of Health and Human Services,

you will work with me to incorporate Oregon’s waiver into the legislation or at a

minimum fight with me to modify the Senate package to expand the definition of

work and increase the amount of time allowed in basic skill development programs.

Regarding SCHIP, almost $1.1 billion in needed, but unused SCHIP funding reverted to the U.S. Treasury last year. We must recapture that funding and put it

back into circulation for the States to use in their SCHIP programs. I know Utah

has a strong program thanks to your work as Governor, and we need your help now

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as Secretary to recapture that funding so it can be used to improve enrollment in

other States.

Finally, I would like to talk about two issues on which the Administration and

I differ—importation of prescription drugs and expanding stem cell research. I

would like to work with you on both of these critical issues, because they truly are

life and death. I would like to urge the Administration’s support of expanding the

President’s current stem cell policy to allow for the utilization of embryos from IVF

facilities. We know that the existing lines are not adequate, many are corrupt and

others didn’t develop as expected. We must increase the number of lines available

for research so we can find cures for Parkinson’s, diabetes, and spinal cord injuries.

On importation, I hope we can work together to lift the ban on American consumers and legalize importation of prescription drugs. I know this is a controversial

issue; however, I remain convinced that we must utilize all means to pressure foreign governments to increase their prices and begin shouldering their portion of the

R&D costs for pharmaceutical development. Only then will the price of prescription

drugs in the U.S. become more affordable.

Thank you for your time, Governor Leavitt, and I look forward to working with

you in your new capacity as Secretary of the Department of Health and Human

Services. I wish you the best of luck.

Thank you, Mr. Chairman.

PREPARED STATEMENT OF HON. CRAIG THOMAS

Thank you, Mr. Chairman, for holding today’s nomination hearing on Michael

Leavitt, to be the Secretary of Health and Human Services. I appreciate you taking

swift action on this nominee, and look forward to an expedited confirmation process.

Welcome, Governor Leavitt. I am pleased that President Bush has selected a candidate who understands not only how Federal policies and programs affect rural

areas, but who also approaches solutions by keeping local people’s needs in mind.

I look forward to your testimony.

As I travel throughout Wyoming, almost everyone I talk to—patients, doctors,

hospital administrators, and small businessmen—agree our Nations’ health care

system is broken. Hospitals struggle with low public and private insurance reimbursement rates to collect revenues, providers cost shift to those with private insurance, the uninsured access emergency rooms for primary care at a high cost to taxpayers, Americans pay the highest price for prescription drugs while shouldering

the majority of global research and development costs, doctors waste billions of dollars on unnecessary tests for fear of being sued, and small businesses are quickly

getting priced out of the health insurance market only to join the ranks of the uninsured.

We are the most advanced country on earth, and yet there are some who still lack

access to quality health care. Frankly, many of these folks live in rural areas like

Wyoming. We face significant challenges, and in my mind, there is none more pressing than our rural health delivery system. Working families need access to quality,

affordable, and accessible health care services. This is difficult in Wyoming, where

it is not uncommon for people to go without care due to long driving distances, adverse weather conditions, or provider shortages. Maintaining strong rural health

care networks not only ensures Wyomingites can access the quality care they deserve, but also drives economic development and job creation. Communities offering

a viable, sustainable health care infrastructure attract and retain residents, workers, and businesses.

That is why I, along with my Senate Rural Health Caucus colleagues, worked so

hard to include a $25 billion rural health package in the Medicare Modernization

Act. These dollars, solely dedicated to rural health initiatives, represent the most

comprehensive attempt to put rural providers on a level playing field with their

urban counterparts. The Secretary of Health and Human Services must play a key

role to implement these critical initiatives, and I am committed to work in a bipartisan, bicameral manner to support these programs and policies.

As Secretary of Health and Human Services, you will face many challenges in the

years to come: reducing the skyrocketing cost of health care while improving quality, access, and safety; implementing the first-ever prescription drug benefit for seniors under Medicare; and finding innovative and cost-effective ways to provide

health insurance coverage—including access to affordable prescription drugs. I look

forward to working with you to find solutions. I wish you the best of luck as this

process moves forward, and once confirmed, invite you to visit Wyoming soon to see

our unique needs first-hand. Thank you, Mr. Chairman.

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PREPARED STATEMENT OF HON. RON WYDEN

This may well be the most difficult time in history to tackle the job of Secretary

of Health and Human Services. The challenges facing our health care system right

now are enormous, and problems loom even larger for the future. David Walker, the

Comptroller General of the Government Accountability Office, has already said that

anticipated increases in Medicare and Medicaid obligations are quote, ‘‘unsustainable for future generations of Americans.’’

Skippering the Department of Health and Human Services through the rocky waters of the next few years will be no small task. It will require a pro-active, even

aggressive two-pronged commitment. First, it will take a commitment to tackling

the problems that can be tackled today. Then, a commitment to starting now to create a viable health care system for tomorrow—one that works for all Americans.

The outgoing Secretary of Health and Human Services recognized this, I believe.

Secretary Thompson endorsed a proposal I’ll want to discuss with Mr. Leavitt in the

days ahead: giving the Secretary of Health and Human Services bargaining power

in the Medicare prescription drug program. Senator Snowe and I had a bill in the

last Congress to do that, and we will be introducing a revised version of that bill

this Congress shortly. Our legislation, the Medicare Enhancement for Needed Drugs

Act, or MEND, would give Medicare the same kind of leverage that private sector

purchasers have to negotiate for the best prices possible for prescription drugs. It

seems to me that the Medicare program should have every weapon in the arsenal

to keep costs down. Bargaining power—allowing the Secretary to leverage the power

of millions of seniors in the market place—can be one of the most potent of those

weapons.

That’s the kind of common-sense solution that can be implemented today, with

bipartisan support and a will to act. I also believe there must be a long-term, bottom-up strategy to truly ‘‘fix’’ the American health care system. Senator Hatch and

I wrote the ‘‘Health Care that Works for All Americans Act’’ as a fresh, radical approach to make that happen. In about a month David Walker at the Government

Accountability Office will name the members of a Citizens Working Group to spearhead the effort. The Secretary of Health and Human Services will be a part of that

group. They’ll be charged with two things: first, to write a report to the American

public about how their health care dollars are spent now. Second, to gather input

from the American people, in town meetings and online about what our health care

system should look like and what tough choices we’re willing to make together to

get a system that works for everyone. When the Working Group, including the HHS

Secretary, synthesizes the response of the American people and reports to Congress,

Congress is required to hold hearings on the recommendations. This is a completely

new approach to health care reform that breaks with the failed traditions of the

past 6 decades. Secretary Thompson has been supportive of this effort, and I hope

that Mr. Leavitt will be a willing and active partner in this process this year.

The Health Care that Works for All Americans Citizens’ Working Group will be

one of many things on the HHS Secretary’s plate. From everything I have read in

the press, one task envisioned for Mr. Leavitt is to either chop Medicaid spending

or turn the program into a block grant. In the same way that Senator Hatch and

Senator Snowe and I have worked to find better bipartisan solutions to health policy

issues, I hope Mr. Leavitt will find better bipartisan alternatives for Medicaid. It’s

just the plain truth that simply capping or cutting spending in Medicaid or any

health program tends to exacerbate the problems—it certainly doesn’t solve them.

In the 1990s efforts failed to end Medicaid’s current form of financing and replace

it with block grants. Most critics of block granting believe that it would destroy

Medicaid program. I know that Mr. Leavitt supported the idea and was reportedly

influential in working out compromises that were beneficial to governors—such as

securing more control over program design.

My own State wants flexibility in Medicaid. One of our best efforts used flexibility

to create the Oregon Health Plan, with its unique system of determining covered

services and used savings to expand coverage. The Administration and most other

States want flexibility in Medicaid as well. But as health care costs rise, flexibility

cannot be allowed to become a euphemism for simply cutting the services to people

in need.

Reviews of the Utah Medicaid waiver under Mr. Leavitt were mixed. The Wall

Street Journal described it as a ‘‘novel effort,’’ saying that Mr. Leavitt ‘‘played Robin

Hood, but with a twist, taking from the poor to help others who were poor.’’ What

seems to be lacking in much of the debate about the Utah waiver is information

about its real impact on the health of Medicaid patients in that State. We do not

know if the lack of hospital and specialty care and reported difficulties in accessing

donated free care were harmful to folks’ health, or whose health may have suffered.

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This example calls for better evaluations of whether different State Medicaid plans

really work for everyone they’re meant to serve.

How we find funds for Medicaid services in every State, and how flexibility may

help those funds stretch further, are legitimate issues for debate. But that debate

must rest on a commitment to making sure the programs work for people in need

of access and coverage. For my part, I do not believe block grants will help the financial situation States face in providing health care to the poor.

I believe there must be better ideas for saving money and providing the basics

of health care to everyone—without sacrificing people’s health to do it. Let me give

you a couple of examples of the kind of innovation HHS should encourage.

My State has pioneered the use of home- and community-based waivers to help

the elderly receive cost-effective, quality care while staying out of expensive nursing

homes. Home- and community-based care is less expensive and is frequently a better solution for many individuals. So many States now have home- and communitybased programs that it may be time to update Medicaid, to help States avoid the

cumbersome waiver process in this case.

Oregon has also pioneered the use of research on drug effectiveness to make sure

the medicines that work are the ones being prescribed. I am proud to say that 13

States and two non-profits have collaborated to do this research at Oregon Health

and Science University. This evidenced-based tool is helping providers make costeffective decisions, and better health-care decisions as well.

These are just two examples of the kind of innovation needed to address the cost

and quality of care. Innovation can come in small steps, and it certainly can come

from the Secretary’s office. Secretary Thompson made prevention a central issue. He

recognized that obesity and diabetes were harming Americans in epidemic proportions, saw the cost to the health care system, and started reaching out to help individuals make life-saving and money-saving changes. That good work should continue.

I also believe Mr. Leavitt should focus on bringing our health care programs into

the 21st century with information technology. Again, this is an issue with bipartisan

support; Newt Gingrich also has made a point of advancing information technology

as one of the ways to make health care more effective. I was disturbed by the lack

of funding this year for HHS grants to improve the use of health information technology. I was even more disturbed when I learned that the Administration did not

fight for this funding. To me, investing in health care technology is a way to purge

our systems of duplications that contribute to medical errors and cost money.

It’s time to look beyond the budget ax to assure access to health care for all. It’s

time to look for bipartisan solutions to the problems we can tackle today, and to

work together for tomorrow—building a health care system that works for all Americans. It is my hope that Mr. Leavitt will commit today to being Congress’ partner

in both.

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