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77–557 PDF 2013

THE FISCAL YEAR 2013 HHS BUDGET 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

MARCH 1, 2012 

Serial No. 112–121 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

CLIFF STEARNS, Florida 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

Vice Chairman 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

BRIAN P. BILBRAY, California 

CHARLES F. BASS, New Hampshire 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

SUBCOMMITTEE ON HEALTH

JOSEPH R. PITTS, Pennsylvania 

Chairman 

MICHAEL C. BURGESS, Texas 

Vice Chairman 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

TIM MURPHY, Pennsylvania 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

JOHN D. DINGELL, Michigan 

EDOLPHUS TOWNS, New York 

ELIOT L. ENGEL, New York 

LOIS CAPPS, California 

JANICE D. SCHAKOWSKY, Illinois 

CHARLES A. GONZALEZ, Texas 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

JIM MATHESON, Utah 

HENRY A. WAXMAN, California (ex officio) 

(II) 

(III) 

C O N T E N T S 

Page 

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

of Pennsylvania, opening statement ................................................................... 2 

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

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

New Jersey, opening statement .......................................................................... 5 

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

California, prepared statement ........................................................................... 56 

WITNESS

Kathleen Sebelius, Secretary, Department of Health and Human Services ...... 5 

Prepared statement .......................................................................................... 8 

Answers to submitted questions ...................................................................... 58 

SUBMITTED MATERIAL

Statement, undated, of Catholic Charities USA, submitted by Mr. Pitts ........... 19 

(1) 

THE FISCAL YEAR 2013 HHS BUDGET 

THURSDAY, MARCH 1, 2012 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON HEALTH, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:00 a.m., in room 

2123 of the Rayburn House Office Building, Hon. Joe Pitts (chairman of the subcommittee) presiding. 

Members present: Representatives Pitts, Burgess, Whitfield, Rogers, Myrick, Murphy, Blackburn, Gingrey, Latta, McMorris Rodgers, Lance, Cassidy, Guthrie, Barton, Upton (ex officio), Pallone, 

Engel, Capps, Schakowsky, Christensen, Markey, and Waxman (ex 

officio). 

Staff present: Clay Alspach, Counsel, Health; Gary Andres, Staff 

Director; Mike Bloomquist, General Counsel; Howard Cohen, Chief 

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

Nancy Dunlap, Health Fellow; Paul Edattel, Professional Staff 

Member, Health; Julie Goon, Health Policy Advisor; Debbee Keller, 

Press Secretary; Ryan Long, Chief Counsel, Health; Carly 

McWilliams, Legislative Clerk; Nika Nour, NewMedia Specialist; 

John O’Shea, Professional Staff Member, Health; Monica Popp, 

Professional Staff Member, Health; Chris Sarley, Policy Coordinator, Environment and Economy; Heidi Stirrup, Health Policy Coordinator; Phil Barnett, Democratic Staff Director; Alli Corr, Democratic Policy Analyst; Eric Flamm, FDA Detailee; Amy Hall, Democratic Senior Professional Staff Member; Ruth Katz, Democratic 

Chief Public Health Counsel; Purvee Kempf, Democratic Senior 

Counsel; Elizabeth Letter, Democratic Assistant Press Secretary; 

Karen Nelson, Democratic Deputy Committee Staff Director for 

Health; and Anne Morris Reid, Democratic Professional Staff Member. 

Mr. PITTS. This subcommittee will come to order. 

As agreed earlier with the Democrat side of the aisle, each side 

will be recognized for 1 minute for opening statements. Then we 

can move straight to Secretary Sebelius’s testimony and questions. 

The Chair reminds the members that pursuant to the committee 

rules, all members’ opening statements will be made part of the 

record. The Chair recognizes himself for 1 minute for an opening 

statement. 

2 

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

OF PENNSYLVANIA 

First, I would like to thank Secretary Sebelius for being here 

with us today to discuss the fiscal year 2013 budget. One of the 

most striking features of this year’s budget is just how much of it 

is not dependent upon Congress. 

For example, the phrase ‘‘ACA Mandatory Funding’’ appears 

throughout the budget tables, and this designation means, of 

course, that the Affordable Care Act requires automatic appropriations for certain items. The phrase ‘‘Prevention Fund’’ also appears 

numerous times, referencing the Prevention and Public Health 

Fund, a multibillion-dollar fund over which the Secretary has sole 

discretion. 

Beyond the absence of Congressional authority over these funds, 

I am deeply troubled by the lack of accountability and transparency 

practiced by the department, and I hope the Secretary will be able 

to explain why her department is so late on so many of the rules 

required by PPACA. 

[The prepared statement of Mr. Pitts follows:] 

3 


77557.001

Rep. Joseph R. Pitts 

Opening Statement 

Energy and Commcrce Subcommittee on Health 

Hcariug 011 "The FY 2013 HHS Budget" 

March 1. 2012 

I \\ouid like to thank Sccretary Sebelius for bcing here with us today to discuss the FY2013 

budget. 

One of the 11l0st striking features of this year's budget isjust how much of it is not dependent 

upon Congress. 

For exal1lple, the phrase "ACA Mandatory Funding." appears throughoulthe budget tables. This 

designation means. of course. that the Affordable Care Act requires automatic appropriations for 

certain items. 

The phrase "Prevention Fund" also appears numerous times. referencing the Prevention and 

Public Health Fund - a multi-billion dollar fund over which the Secretary has sole discretion. 

Beyond the absence of Congressional authority over thesc hlllds. I am deeply troubled by the 

lack of accountability and transparcncy practiccd by the Department. 

Regarding the rule-making process for PPACA. HHS has repeatedly missed deadlines for issuing 

rules. has issucd interim tinal rules that do not require public comment with no apparent 

intention to movc toward a final rule, and has issued "bulletins" instead of tina I rules. 

One controversial rule that HilS issued as an interim tinal rule and has caused considerable 

backlash is the so-called Preventive Services rule. 

This illegal and unconstitutional rule mandates that abortion drugs be provided in all health 

insurance plans with only a very narrow exemption for some churches. 

Such a requiremcnt violates a number of legal protections lor religious exercise and expression 

and violates the rights of conscience long protected in our country and enshrined in our 

Constitution. 

Perhaps recognizing the controversy. President Obama announced on February 10. his intent to 

make changes to the interim tinal rule and referenced an "accommodation." 

According to a White House "fact shect." SOI1lC religious cmployers will no longer be required to 

provide insurance coverage for abortion-inducing drugs. sterilizations and contraception. but 

insurance companies will be required to do so. 
4 


77557.002

Of course, insurance companies will pay for this "fi'ee" benefit with the prcmiullls they collect 

from the very same organizations who opposed paying for abortion-inducing drugs in the first 

place. 

Ultimately. this is not an argumcnt about contraccption or any patticular service. 

This is about religious liberty and whcther pcople with deeply held moral and religious beliefs 

should be put in a situation where they have only two choices: comply with the law. thus 

violating thcir consciences OR not comply with the law and face ruinous fines. forcing them to 

closc their doors. 

I hope the Secretary will be able to explain why her Department is so late on so many of the rules 

required by PPACA. 

And. I hope she has some better answers for us on the Preventive Services rule than what we've 

heard so Ell'. 
5 

Mr. PITTS. The Chair now recognizes the ranking member of the 

subcommittee, Mr. Pallone, for 1 minute for an opening statement. 

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

Mr. PALLONE. Thank you, Chairman Pitts, and Secretary 

Sebelius for being here today. 

I know I have to limit my remarks so I just want to say with 

regard to the Affordable Care Act, I think we are making a lot of 

progress and I certainly urge the President and the Secretary to 

continue taking the steps necessary under the ACA to improve our 

health care system. 

But I am also a strong believer in the importance of government 

investment in advancing science and research. That is why I was 

also pleased to see the President’s continued support towards innovative biomedical and behavioral advancements through investments in the NIH and the FDA. 

I was also pleased to see that the administration has proposed 

an expansion of the Small Business Health Care Tax Credit that 

could benefit almost 3 billion workers this year. My state of New 

Jersey has a high cost of living and a high wage base, which has 

made it tougher for New Jersey small employers to access this tax. 

I would like to see the wage base in each State included in the calculation for eligibility of the tax credit, and therefore I am planning 

on introducing legislation that would remedy this issue, and I hope 

I can work with HHS on this. 

So thank you, Madam Secretary, for being here. 

Thank you, Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentleman. 

Our witness today will be the Secretary of the Department of 

Health and Human Services, the Honorable Kathleen Sebelius. 

Secretary Sebelius, we are delighted to have you back with us 

today, and you are recognized for 5 minutes for an opening statement. 

STATEMENT OF KATHLEEN SEBELIUS, SECRETARY, 

DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Ms. SEBELIUS. Thank you so much, Chairman Pitts and Ranking 

Members Pallone and Waxman and members of the committee. I 

am pleased to be with you today to discuss the President’s 2013 

budget for the Department of Health and Human Services. 

Our budget helps to create an American economy built to last by 

strengthening our Nation’s health care, supporting research that 

will lead to tomorrow’s cures and promoting opportunities for 

American children and families so everyone has a fair shot to reach 

his or her own potential. 

It makes investments that we need right now while reducing the 

deficit in the long run to make sure that the programs that millions of Americans rely on will be there for generations to come, 

and I look forward to answering your questions, Mr. Chairman, 

about the budget, but I want to just take a few minutes to share 

some of the highlights. 

6 

Over the last 2 years, we have worked to deliver the benefits of 

the Affordable Care Act to the American people. Thanks to the law, 

we now have 2.5 million additional young millions already getting 

coverage through their parents’ health plans. More than 25 million 

seniors have already taken advantage of the free recommended preventive services under Medicare, and small business owners are 

getting tax breaks on their health care bills that allow them to hire 

more employees. This year we will build on that progress by continuing to support States as they work to establish affordable insurance exchanges by 2014. Once these competitive marketplaces 

are in place, they will ensure that all Americans have access to 

quality, affordable health coverage. 

But we know that a lack of insurance isn’t the only obstacle to 

care, so our budget also invests in our health care workforce. The 

budget supports training more than 7,100 primary care providers 

and placing them where they are needed most. It also invests in 

America’s network of community health centers. Our budget helps 

health centers provide access to quality care for 21 million Americans, 300,000 more than were served last year. 

This budget also continues the administration’s commitment to 

improving the quality and safety of care by spending health dollars 

more wisely, and that means in health information technology. It 

means funding the first-of-its-kind CMS Innovation Center, which 

is partnering with physicians, nurses, private payers, hospitals and 

others who have accepted the challenge to develop new, sustainable 

methods for the health care system. In addition, the budget ensures that a 21st century America will continue to lead the world 

in biomedical research by maintaining funding for the National Institutes of Health. 

At the same time, we recognize the need to set priorities, make 

difficult tradeoffs and ensure we use every dollar wisely. That 

starts with continuing support for President Obama’s historic push 

to stamp out waste, fraud and abuse in the health care system. 

Now, over the last 3 years, every dollar we have put into health 

care fraud has returned more than $7. That is a pretty good investment. Last year alone, those efforts recovered more than $4 billion, 

which are both in the Medicare and Medicaid trust funds around 

the country. And this week, our administration arrested the alleged 

head of the largest individual Medicare and Medicaid fraud operation in history. Our budget builds on those efforts, giving law enforcement the technology and data to spot perpetrators early and 

prevent payments based on fraud from going out in the first place. 

The budget also contains more than $360 billion in health savings 

over the next 10 years, most of which comes from reforms to Medicare and Medicaid. These are significant but they are carefully 

crafted to protect beneficiaries. 

For example, we proposed significant savings in Medicare by reducing drug costs, a plan that not only reduces the costs of pharmaceuticals but puts money back in the pockets of Medicare beneficiaries. The budget makes smart investments where they will 

have the greatest impact, and it puts us all on a path to build a 

stronger, healthier and more prosperous America for the future. 

Again, thank you, Mr. Chairman, for this invitation,k and I look 

forward to our conversation. 

7 

[The prepared statement of Ms. Sebelius follows:] 

8 


77557.003

STATEMENT OF 

KATHLEEN SEBELIUS 

SECRETARY 

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES 

ON 

THE PRESIDENT'S FISCAL YEAR 2013 BUDGET 

BEFORE THE 

COMMITTEE ON ENERGY AND COMMERCE 

UNITED STATES HOUSE OF REPRESENT A TIVES 

MARCH 1, 2012 
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77557.004

Testimony of 

Secretary Kathleen Sebelius 

U.S. Department of Health and Human Services 

before the 

United States House of Representatives 

Committee on Energy and Commerce 

March 1,2012 

Chairman Pitts. Ranking Member Pallone. Chairman Upton. Ranking Member Waxman. and Members 01' 

Ihe Committee. thank you for the invilation to discuss the President's FY 2013 Budget for Ihe Department 

of llealth and I'lnm"n Services (HHS). 

The Budget for the Departmenl of Health and Human Services (1IlIS) invests in health care. disease 

prevention. social services. and scientific research. HilS makes investments where they will have the 

greatest impact. build on the efforts of our partners, and lead to meaningful gains in health and 

opportunity for the American people. 

The President's liscal year (r'Y) ~013 Budget fllr HilS includes a reduction in discretionary funding il)r 

ongoing activities, and legislative proposals that would save an estimated $350.2 billion over ten years. 

The Budget totals $940.9 billion in outlays and proposes $76.7 billion in discretionary bndget authority. 

I'his fnnding will enable I !lIS to: Strengthen Ilcalth Carc: Support American Familics; Advance 

Scientilic Kno\\lcdge and Innovation; Strengthen the Nation's Health and Human Service Infi'astrueture 

and Workforce; Increase Erticiency. Transparency. and Accountability of HHS Programs; and Complcte 

the Implementation of Ihe Recovery Act. 

STRENGTHEN HEALTH CARE 

Delivering Ben~fits ()(the Affordable Care Act to tlte American People: The Affordable Care Act 

expands access 10 af'i(lrdable health covcrage to millions of Americans. increases consumer protections to 

ensure individuals have coverage when they need it most, and slows increases in health costs. Effective 

implementation of tile Affordable Care Act is central to the improved flseal outlook and well-being of the 

Nation. The Centers for Medicare & Medicaid Services (CMS) is rcquesting an additional $1 billion in 

discrdionary funding and 136 full-lime equivalents to continue implementing the Aflordable Care Act. 

including A ffordable Insurance Exchanges. and to help keep up with the growth in the Medicare 

population. 

£'\I)(/I1d lind Improl'e Health Insurance Coverage: Beginning in 20 I 4. A ftordable Insurance Exchanges 

will provide improved access 10 insurance coverage for millions of Americans, Exchanges v\'ill make 

purchasing private health insurance easier by providing eligible individuals and small businesses \\Ith 

one-stop shopping where the: can compare benetit plans. New premium tax credits and reductions in 

cost-sharing will help ensure that eligible individuals can aft(lrd to pay for the cost of private coverage 

through Exchanges. ry 2013 will be a critical year for building the infrastructure and initiating the many 

business operations critical to enabling E~changes to begin operation on January l. 2014. The expansion 

of health insurance coverage lor millions of low-income individuals who were previously no! eligible for 

coverage also begins in 2014. eMS has worked closely with states to ensme they are prepared to meet the 

20 I -+ deadline and will continue this outreach in FY 20 13. 

Many important private market rcrl)J'J)lS have already gone into effect. providing new rights and benefits 

10 consumers that are designed to put them in charge of their own health care. The Affordable Care Act's 

Patient's Bill of Rights allows young adults to Slay on their parents' plans until age 26 and ensures that 

2 
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77557.005

consumers rcceive the care thc) need when they get sick and need it most by prohibiting rescissions and 

lifetime dollar limits on coverage for care. and beginning to phase out annual dollar limits. The neVv 

market reforms abo guarantee independent reviews of coverage disputes. Temporary programs like the 

Early Retiree Reinsurance Plan (ERRP) and the Pre-Existing Condition Insurance Plan (PClP) are 

supporting allordable coverage for individuals who often face dinieulties obtaining private insurance in 

the current marketplace. Additionally. rate review and medical loss ratio ('VILR) provisions helps ensure 

that health care premiums arc kept reasonable and affordable year after year. The already operational rate 

revie\\' provision gives states additional resources to determine if a proposed health care premium 

increase is unreasonable and. in many cascs. help enable state authorities to deny an unreasonable rate 

incrc:ase. HHS revic\\s large proposed increases in states that do not have effective rate review programs. 

The MLR provisions guarantee that. starting in 201 I, insurance companies usc at least 80 percent or 

85 percent of premium revenue. depending on the market. to provide or improve health care for their 

cllstomers or give them a rebate. 

Strengtilen tlte DelivelT System: The Affordable Care Act established a Center il)r Medicare and 

Medicaid Innovation (Innovation Center). The Innovation Center is tasked with developing. testing. 

and·-I()'- those that prow suceessful-·expanding innovative payment and delivery system models to 

improve qualit! ofeme and reduce costs in Medicare. Medicaid. and the Children's Health Insurance 

Program (CHIP). Since the Innovation Center began opcrations it has undertaken an ambitious agenda 

encompassing patient safety. coordination of care among multiple providers. and enhanced primary care. 

These projects can serve as crucial stepping stones towards a higher-quality. more efficient health care 

system. 

HHS is also working to ensure that the most vulnerable in our Nation have full access to seamless. 

high-quality health care. The Aftordable Care Act established a new oftlce to more dTectively integrate 

benelits and improve coordination between stiltes and the Federal Governlllcnt for those who are eligible 

!tlJ' both Medicare and Medicaid. While Medicare-Medicaid benellciaries make up a relatively small 

portion or enrollment in the two programs. they represent a significant portion of expenditures. 1IIlS is 

currently supporting!:; stales as they d~sign models of care that better integrate Medicare and Medicaid 

Services and is designing additional demonstrations to continue to improve care. 

CMS is currently offering three initiatives that will help spur the development of Accountable Care 

Organizations (ACOs) i(" Medicare benellciaries. ACOs are groups of health providers who join together 

to give high-quality. coordinated care to the patients they serve. if an ACO meets quality standards. it will 

be eligible to shilre in savings it achieves for the Medicare program, and may be subject to losses. olTering 

a powerful incentive to restructure care to better serve patients. 

Ensuring Access 10 Quali(r CarejiJr Vulnerable Populalions: Health Centers arc it key component of 

the Nation's health carc safety net. The President's Budget includcs a total ofS3 billion. including an 

increase 01'$300 million li'om mandatory funds under the Affordable Care Act. to the Health Centers 

program. This investment will provide Americans in underserved areas. both rural and urban. with access 

to comprehensive primary and preventive health care services. This funding will create 25 new health 

center sites in areas of the country where they do not currently exist and provide access to quality care for 

21 million peopk. an increase 01'300.000 additional patients over PY 2012. The Budget also promotes a 

policy of steady and sustainable health center growth by distributing AITordable Care Act resources over 

the !ong~ter!l1. This policy safeguards resources for new and existing health centers to continue services 

Dnd ensures a smooth transition as health centers increase their capacity to provide care as access to 

insurance coverage expands. 

Illll'fOVillK Heullilcare Ql1l1li~1' fllItI Patient Sa/etr: The Affordable Care Act directed HHS to develop a 

national strategy to improve health care services delivery. patient health outcomes. and population health. 

3 
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77557.006

In FY 20 II, HHS released the National Strategy for Quality Improvement in Health Care, which 

highlights three broad aims: Better Care, Healthy People and Communities, and Affordable Care. Since 

publishing the Strategy. HHS has focused on gathering additional input lI'om private partners and aligning 

new and existing I-IHS activities with the Strategy. HHS will enhance the Strategy by incorporating input 

from stakeholders and developing metrics to measure progress tOlVard achieving the Strategy's aims and 

priorities. /\!read), the Strategy is serving as a blueprint for quality improvement activities across the 

country. 

CMS will continllC funding for the Partnership for Patients, an initiative launched in April 2011 that sets 

aggressiw targets lor improving the quality of healthcare: reducing preventable hospital-acquired 

conditions by 40 percent and preventablc readmissions by 20 percent by the end 01'2013, as compared to 

2010. 

Illvestillg iIlIIlIlOl'lItioll.· I-II-IS is committed to advancing the use of health information technology 

(health IT). The Budget includes $66 million, an increase ofS5 million, for the Onlce of the National 

Coordinator till' I kalth Iniilrlnation Technology (ONC) to accclerate the adoption of health IT and 

promote electronic health records (EI-IRs) as tools to imprm-e both the health of individuals and the health 

care s::stem as a \\ hok. The increase will allow ONe to provide more assistance to health care providers 

as they become meaningful users of health IT. Furthermore. through the Health Information Technolog,Y 

t(lr Economic and Clinicailicalth Act (f-IITECH) provisions of the American Recovery and Reinvestment 

.-\CL CMS is providing hospitals and medical professionals "Ill) participate in Medicare and Medicaid 

"ith substantial incentive payments for the adoption and meaningful use of EH Rs. As of the end of 20 I I, 

C~v1S had made incentive payments to 15.8)9 providers who have met the objectives for meaningful use 

in the Medicare EHR Incentive Program and 15.132 providers "ho have adopted. implemented, or 

upgradcd FHRs in the Medicaid EHR Incentive Pf'Clgram. Fly encouraging providers to modernize their 

systems, this investment will improve the quality of care and protect patient safety. 

SUPPORT AMERICAN FAMILIES 

Helllihy Development ofChildrenlilld Fllmilies: HHS oversees many programs that support children 

and families. including Head StarL Child Care. Child SUPP0li, and Temporary Assistance lor Needy 

Familie, (TA:--.!F). The FY 2013 Budget request invests in early education, recognizing the role 

higil-quality early education programs can play in preparing children for school success. The request also 

supports TANF and proposes to restore funding for the Supplemental Grants without increasing overall 

TA NF JllI\ding. 

illl'l!,'iling in Education hy Supporting an E(lr~l' Learning Refofln Agenda: The FY 2013 Budget 

supports critical reforms in Head Start and a Child Care quality initiative tilaL when taken together with 

the Race to the Top Early Learning Challenge, arc key elements of the Administration's broader 

~dl!(ation rcfl)rm agenda designed to improve our Nation'S competitiveness by helping every child enter 

schoo! ready for success. 

On November 8, 20 I I the President announced important new steps to improve the quality of services 

and accountability at Head Start centers across the country. The Budget requests (lver $8 billion tor Head 

Start programs, an increase 01'$85 million over FY 2012, to maintain services for the 962.000 children 

currently participating in tile program. This investment will also provide resources to effectively 

implement new regulations that require grantees that do not meet high quality benchmarks to compete for 

continued funding. introducing an unprecedented level of accountability into the Head Start program. Bv 

directing taxpayer dollars to programs that offer high-quality Head Start services, this robusL open 

competition if)r Head Start funding will help to ensure that Head Start programs provide the best available 

earty education services to our most vulnerable children, 

4 
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77557.007

Th" Budget provides $6 billion for child care. an increase of $825 million over FY 2012. This funding 

level will provide child care assistance to 70.000 1110re children than could otherwise receiw services 

without this increased investment; 1.5 million children in total. In addition to providiilg funding for direct 

assistance to more children. the Budget includes $300 million for a new child care quality initiative that 

states would usc to invest directly in programs and teaellers so that individual child care programs can do 

a better job of meeting the early learning and care needs of children and families. The funds would also 

support ert'Jrts to measure the quality of individual child care programs through a rating system or another 

system of quality indicators. and to clearly communicate program-specific information to parcnts so they 

"an make informed choices for their lilmilies. These investments arc consistent with the broader 

reauthorization principles outlined in the Budget. which encompass a reform agenda that would help 

transform the l"ation', child care system to one that is [()cused on continuous quality improvement and 

provides more low-income children access to high-quality early education settings that support children's 

learning. development. and sliccess in school. 

Keel'il1K Al11ericlllIclllthy: The President's Budget includes resources necessary to enhance clinical and 

community prevention. support research. develop the public health workforce, control infectious di,eases. 

anu invest in prevention and management of chronic diseases and conditions. 

Millioll IIcart,'/lIiliative: The Million Hearts Initiative is a national public-private initiative aimed at 

prcventin[' I million heart attacks and strokes over 5 years. It'om 2012 to 2017. It seeks to reduce the 

number of people who need treatment and improve the quality ol'trcatment that is available. It focuses on 

increasing the number of Americans who have their high blood pressure and high cholesterol under 

controL reducing the number of people who smoke, and reducing the average intake of sodium and trans 

fat~. To m:hieve this overall goal. the Initiative wili promote medication management and support a 

network ofelectl'llnic health record registries 10 truck blood pressure and cholesterol control. along with 

Illany other public-pri"ate collaborations. In FY 2013. the Budget requests $5 Illillion for CDC to achiew 

mc-asl!r~lble outcomes in these areas. 

l'reventinK Teen PreK/lll/lcy: The Budget includes SI05 million in the Prevention and Public Health 

Fund Illr the Office of the Assistant Secretary j'lr l10alth for teen pregnancy prevention programs. These 

programs will support cOlllmunity-based ert'lrts to reduce teen pregnancy using evidence-based models as 

well as promising programs and innovative strategies. The Budget also includes $15 million in funding 

III I' CDC teen pregnancy prevention activities to reduce the number of unintended prcgnancies through 

science-based prevention approaches. 

Protect Vulnerahle Populations: fillS is committed to ensuring that vulnerable populations continue to 

receive critical services during this period of economic uncertainty. 

Reduce Foodbol'l1l! Illness: The I"~udget reflects the Administration's commitment to transforming Ollr 

Nation's food safety system into one that is stronger and that reduces food borne illness. To reach this 

goal. the Gudget includes $1.5 billion. an increase 01'$271 million over FY 2012. for FDA and CDC food 

safety activities. III-lS will continue to modernize and implement a prevention-focused domestic and 

import safety 'Y5tem. Collaborativel),. fDA and CDC are working to decrease the rate of Salmonella 

Enteritidis illness in the population from 2.6 cases per 100,000 to 2.1 cases per 100.000 by December 

2013. In FY 2013. CDC will enhance surveillance systems and designate five Integrated Food Safety 

Centers of Excellence at state health departments. In addition to working with manufacturers to 

implemcnt preventive controls. the Budget proposes an FDA food inspection and food facility registration 

USCI' fce that "ill aid in providing rcsources to fDA to ensure the safety and security of the Nation's I'lod 

supply. 

5 
13 


77557.008

ADVANCE SCIENTIFIC KNOWLlmG~: ANn I:-iNOVATION 

Biomedical amI Behavioral Research: The FY 2013 Budget maintains funding for the NIH at the 

PY 2012 level of $30.9 bill ion. reflecting the Administration's priority to invest in innovative biomedical 

and behavioral research that spurs economic grO\vth whilc advancing mcdical science to improve health. 

NIl I is generating discoveries that arc opening new avenues for disease treatment and prevention and 

revolutionizing patient care. In FY 2013. Nlil will seek to take advantage of such discoveries by investing 

in basic rcs~arch on the fundamental causes and mechanisms of disease, accelerating discovery through 

11('\\ technologies. advancing translational sciences, and encouraging new investigators and nc\v ideas. 

National CCIIler,/ilr Advancing Translatiollal Sciellces: In FY 2013, NIII will continue to implement 

the new National Centcr lor Advancing Translational Sciences (NCATS), established in FY 2012, in order 

to IT-engineer the process of translating scicntiCic discoveries into nc\\' medical products. Working closely 

with partners in the r~gulatory, academic, nonprolit. and private sectors while not duplicating work going 

on in the private sector, NCATS will strive to identify innovative solutions to overcome hurdles that slo\\ 

the development of elTcctivc treatments and cures. A total ofS639 million is proposed fix NCATS in 

PY 2013, including $50 million for the Cures Acceleration Network. 

Medical Coulllerl1lea.\'ure f)el'e/o[ll11el1t: The IIIIS Medical Countermeasure Enterprise includes 

initiatives across the Department covering the spectrum of medical countcrmeasure development. fi'om 

early biological research to stockpiling of approved products. The PY 2013 Budget includes $547 million 

for the Biomedical Advanced Research and Development Authority. an increase 01'$132 million over 

FY 2012, 10 develop and improve ne't-generation medical countermeasures (MCM) in response to 

potential chemical. biological. radiological. and nuclear threats. The Budget also provides $50 million to 

establish a strategic investment corporation that would function as a public-private venture capital fund 

providing companies developing MCMs with thc necessary tinancial capital and business acumen to 

improve the chances of successful development or new MCM technologies and products. Together, these 

investments" ill provide HilS with ncw tools to enhance the success of medical counlermeasure 

development. 

EniIancing Hea/liI Care Decision-Making: The HilS Budget includes $599 million for research thai 

CO!l1pare<; the risk, benefits, and etfectiveness of different medical treatments and strategies, including 

health care delivery. medical devices, and drugs. including $78 million Irom the Patient-Centered 

Outcomes Research Trust fund established bv the Af'I<.lrdable Care Act. Evidence generated through this 

research is intended to help patients make intonned health care decisions that best meet their needs. This 

level ofCuntiing \Viii primarily support research conducted by NIH, core research activities within the 

Agency for Ilealthcare Researeh and Quality (AI IRQ), and data capacity activities within the Orrice of 

the Secretary. Resources from the Trust Fund will support comparative clinical effectiveness research 

dissemination. improved research infrastructure. and training or paticnt~ccntcrcd outcomes researchers. 

IIIIS core research will be coordinated to complement projects supported through the Trust Pund and 

through the independent Paticnt-Centered Outcomes Research Institute. 

STRENGTH EN 'I'll E NA nON'S HEAL Til ANI) HUMAN SERVICE INFRASTRUCTURE ANI) 

WORK FORCE 

fllI'eslil1g ill "!lraslructllre: A strong health workforce is key to ensuring that more Americans can get 

the quality care they need to stay healthy. The Budget includes $677 million, an increase 01'$49 million 

over FY 2012. II ithin HRSA 10 expand the capacity and improve the training and distribution of primary 

care. dental, and pediatric health providers. The Budget will support the placement of more than 7.100 

primary care providers in ullckrscrvcd areas and begin investments that expand the capacity of instjtution~ 

to train 2,800 additional primary care providers over 5 years. 

6 
14 


77557.009

INCRL!'SE EFFICIENCY, TRANSPARENCY, AND ACCOCNTABlLlY OF HHS PROGRAMS 

Living lVi/hin Ollr Mel/lIS: III IS is committed to improving the Nation's health and well-being while 

simultaneously contributing to dellcit reduction. The FY 2013 discretionary request demonstrates this 

commitment by maintaining ongoing investments in areas most central to advancing the HHS mission 

\\hllc making reductions to lower priority areas. reducing duplication. and increasing administrative 

efficiencies. Overall. the FY 20 I 3 request includes over $2. I billion in terminations and reductions to 

fund initiatives while achi~ving savings in a constrained fiscal ~nvironment. Many of these reductions. 

such as the S I 77 million cut to the Children's Hospital Graduate Medical F:ducalion Payment Program. 

the 5327 million cut to Community Services Block Grants. and the $452 million cut to the Low Income 

1·lome Energy Assistance Program (LiHEAP). IV ere vel') difficult to make. but are necessitated by the 

current fiscal environment. 

Regarding LIlIEAP. the Administration proposes to adjust funding for expected winter fuel costs and to 

target funds to those most in need. The request is $3 billion. $452 million below the FY 2012 level and 

$450 million above both ry 2008 and the ~O 12 request. With constrained resources, the Budget targets 

assistance where it is needed most. The request targets $~.8 billion in base grants using the state 

allocation Congress enacted fllr FY 2012. The request also includes S200 million in contingency funds. 

\\ hich will be used to address the needs of households reliant on home delivered fuels (heating oil and 

propane) should e"pected price tremb be realized. as well as other energy-related emergencies. 

In Septemher 20 I I. the Administration detailed a plan for economic gro\\th and delicit reduction. The 

ry 20 I} Budget It)lIows this blueprint in it> legislative proposals. presenting a package of health savings 

proposals that would save more than $360 billion over 10 years. with almost all of these savings coming 

from Medicare and Medicaid. Medicare proposals would encourage high-quality. efficient care. increase 

the availability ofgcncric drugs and biologics. and implement structural reforms to encourage 

bencticiaries to seek value in their health care choices. The Budget also seeks to make Medicaid more 

Ilexible. efficient. and accountable while strengthening Medicaid program integrity. Together, the 

FY ::'013 discretionary request and these legislative proposals allow HHS to suppOli the 

Administration's yet complementary goals of investing in the tlnure and establishing a 

sustainable tiscal outlooK. 

Program JIJ/egri(r {(nd Oversigllt: The ry 2013 Budget continues to make program integrity a top 

priority. The Budget includes $610 million in discretionary funding for Health Care Fraud and Abuse 

Control (IKTAC). the full amount authorized under the Budget Control Act 01'201 I (RCA). The Budget 

also proposes to Cu!ly fund discretionary program integrity initiatives at $581 million irl FY 201:::. 

consistent with the BC/\. The discretionary investment supports the continued reduction of the Medicare 

ke-for-scrvice improper payment rate: investll1Cnts in prevention-focused. data-driven initiatives like 

predictive modeling: and HHS-Oepartment of Justice Ilealth Care Fraud Prevention and Enforcement 

Action Team (IlEA T) initiatives. including Medicare Strike Force teams and fighting pharmaceutical 

fraud. 

From 1997 to 20 II, HCr AC programs have returned over $20.6 billion to the Medicare Trust Funds. and 

the current three-year return-on-investment 01'7.2 to I is the highest in the history oftlte HCFi\C 

The Budget proposes a 10-year discretionary investment yielding a conservative estimate of 

1.3 billion in Medicare and Medicaid savings and 16 program integrity proposals to build on the 

A fl(lrdable Care Act's comprehensive fraud lighting authorities for savings of an additional $3.6 billion 

owr I () years. 

7 
15 


77557.010

Additionally, the Budget includes funding increases ('or significant ovt:rsight activities. The reqllc.st 

includes $84 million for the Office of Medicare Hearings and Appeals. an increase 01'$12 million. to 

continue to process the increasing number of administrative law judge appeals within the statutory 90-day 

timcframe while maintaining the quality and accuracy of its decisions. The Budget also includes 5370 

million in discretionary and mandatory funding for the Oflice of Inspector General (OIG). a 4 percent 

increase ii'om FY 2012. This increase \\ill cnable OIG to expand CMS Program Integrity efforts in areas 

such as HEAT. improper payments. and focus on investigative effol1s on civil fraud. oversight of grants. 

and the operation or new A ffordable Care Act programs. 

Additionally. Durable Medical Equipment (DME) Competitive Bidding is providing competitive pricing. 

\\hile continuing to ensure access to quality medical equipment from accredited suppliers. which IVill 

save Medicare $25.7 billion over 10 years and help millions of Medicare beneficiaries save $17.1 billion 

in out-ol~pocket costs over 10 yems. The Budget proposes to extend some of the efficiencies of D'vlE 

Competitive Bidding to Medicaid by limiting Fedcml reimbursement on certain DME services to what 

Medicare \\ould havc paid in the same state for the same services. This proposal is cxpected to save 

Medicaid $3.0 billion over 10 years. 

COMPLETING IMPLEMENTATION OF TilE RECOVERY ACT 

Thc Amcrican Rccovery and Reinvestment Act provided $140 billion to III IS programs. of which $110 

billion had been spent by grant and contract recipients by the end ofFY 201 I. The vast majority of these 

funds helped state and local communities cope with the effects of the economic recession. 

Thousands ofjons were also created or saved. including subsidized employment and training for over 

260.0()() people through the Temporary Assistance for Needy Families (TANF) program Emergency 

Conting-:ncy Fund, 

The Recovery Act provided states fiscal relief through a temporary increase in Fcderalmatching 

payments of$S4 billion tllr Medicaid and foster carc and adoption assistance. 

III IS Recovery Act funds are also making long-term investments in the health of the American people 

and the health care system itself. Beginning in FY 201 I and continuing for the next few years. HI-IS will 

be investing more than $20 billion to support implementation of health ini()I'mation technology in the 

health care industry on a mass scale. This effort is expected to significantly improve the quality and 

erticiency of the U.S. health care system. In addition. $10 billion in Recovery Act funds were invested in 

hio1llcdical n:search programs around the country, including a major effort to document genomic changc.s 

in 20 of the most common cancers and to build research laboratory capacity, Of more immediate impact. 

$1 billion has been supporting prevention and \Vellness programs. including projects in 44 communities 

with a total combined population of over SO million aimed at reducing tobacco use and the chronic 

diseases associated with obesity. 

HilS has alst) met the challenges of transparency and accountability in the management of its Recovery 

Act runds. Morc than 23.000 grantees and contractors \\ ith Recovery Act fllnding 1'1'0111 I-HIS 

discretionary programs havc submitted reports on the status of their projects over the last 10 quarters. 

~lore than 99 percent orthe required recipient reports have been submitted on time and are available to 

the public on Recovery.gov; non-tilers have becn sanctioned. Finally. j·IHS Recovery Act program 

managers arc \\orking hand-in-hand with the Secretary's Council on Program Integrity to ensure that risks 

tllr fraud. abuse. and \vaste are idcntified and steps arc taken to mitigate those risks. 

Thank you i()r the opportunity to testify. I \I ill be happy to answer uny questions you may have. 

8 
16 

Mr. PITTS. The Chair thanks the gentlelady and we will now 

begin questioning, and I will recognize myself for 5 minutes for 

that purpose. 

Regardless of one’s opinion of the health care law, I think everyone can agree there is a lot of regulatory uncertainty regarding the 

rules of the road moving ahead. States, health providers, small 

businesses and patients have been asking HHS for final or even 

just proposed Federal rules as they relate to PPACA’s exchanges. 

The stakes are high since taxpayers are on the hook for a new $1 

trillion entitlement. With that in mind, I would like to ask you 

about the status of PPACA rules required by the statute, and given 

my limited amount, I would respectfully ask that you answer yes 

or no. I have a series of questions. 

First, has HHS released a final rule as it relates to the individual market exchange? 

Ms. SEBELIUS. The State-based market exchange, a final rule? 

No, sir. 

Mr. PITTS. Has HHS released a final rule detailing what States 

must do to receive Federal approval for their exchange? 

Ms. SEBELIUS. We have not issued a final rule, sir, but we have 

certainly put out bulletins and guidance. We are preparing an interim final rule. We want feedback at every point along the way 

and we are actively working with States around the country—— 

Mr. PITTS. But a bulletin has no real guidance for the State. You 

have not proposed a final rule? 

Ms. SEBELIUS. We have not proposed a final rule, sir, but they 

have a lot of guidance and are very actively engaged in the process 

of helping us shape the final rule. 

Mr. PITTS. Thank you. Has HHS released a final rule related to 

the establishment and operation of a Federal exchange? 

Ms. SEBELIUS. Again, no, Mr. Chairman, but we are in the process. I don’t think you would want us to do that without actively engaging stakeholders along the way, and that is exactly what we are 

doing including the last weekend when the governors were in town 

and we spent hours with state officials talking about—— 

Mr. PITTS. So the answer is no. Has HHS released a final rule 

related to Federal accreditation requirements for health plans? 

Ms. SEBELIUS. Regarding? I am sorry. 

Mr. PITTS. Federal accreditation of health plans. 

Ms. SEBELIUS. No, sir. 

Mr. PITTS. Has HHS released a final rule related to guaranteed 

issue and community rating bands? 

Ms. SEBELIUS. We do not have the final rules released at this 

point. 

Mr. PITTS. Has HHS released even a proposed rule for cost sharing or federally mandated benefits, otherwise known as essential 

health benefits? 

Ms. SEBELIUS. We have released guidance. Most recently we are 

talking to States about the interim final rule. We have given them 

a strategy with a—— 

Mr. PITTS. But not a final rule? 

Ms. SEBELIUS [continuing]. Benchmark plan, and we are preparing the rules as we speak, Mr. Chairman. 

17 

Mr. PITTS. No final rule. The Federal requirements on benefit 

coverage and cost sharing are two of the most basic and critical 

pieces of information needed for States to implement an exchange. 

We are less than 18 months from when plans are supposed to enroll customers in exchange plans yet HHS has not even issued a 

proposed rule on these fundamental pieces of law. Is that correct? 

Ms. SEBELIUS. Mr. Chairman, again, we are actively engaged in 

benchmark plans. We have released guidance. We are getting input 

on that. We are trying to make sure that when we release an interim rule and when we move to final rules that these are workable arrangements with States, with markets around the country. 

So that guidance is very much underway. We are engaged in dialog 

and—— 

Mr. PITTS. I understand. 

Ms. SEBELIUS [continuing]. They are beginning to frame their 

plans but—— 

Mr. PITTS. My time is limited. 

Ms. SEBELIUS [continuing]. We would agree that we need rules 

to monitor them. 

Mr. PITTS. Let me continue. I would submit this is symbolic with 

the state of regulation in Washington. States, small businesses and 

individuals are shoved aside and told that a Federal agency is 

needed to meddle around in their lives and then we pass a law giving Washington almost universal control over one-sixth of the economy and then Washington writes some vague rules for some parts 

of the law and delays rules for other parts of the law. Deadlines 

are not met. States, health care providers and consumers are left 

in the dark and Washington thinks it can just dump a thousand 

requirements on States and the private sector at the last minute 

with no consequences for patient health. 

I have just 35 seconds left. Yesterday, I was contacted by Catholic Charities, and I was asked if I would read into the record their 

actual position on this so-called accommodation because they believe some have mischaracterized where they stand, and upon the 

announcement of the so-called accommodation, Reverend Larry 

Snyder, President and CEO of Catholic Charities USA, stated 

‘‘Catholic Charities USA welcomes the administration’s attempt to 

meet the concerns of the religious community and we look forward 

to reviewing the final language. We are hopeful that this is a step 

in the right direction. We are committed to continuing our work to 

ensure that our religious institutions will continue to be granted 

the freedom to remain faithful to our beliefs while also being committed to providing access to quality health care for our 70,000 employees and their families across the country.’’ However, upon actually seeing what was proposed and having their position 

mischaracterized as if they believed the accommodation was sufficient to protect religious liberty, they posted the following clarification: ‘‘In response to a great number of mischaracterizations in the 

media, Catholic Charities USA wants to make two things very 

clear: One, we have not endorsed the accommodation to the HHS 

mandate that was announced by the administration on February 

10. Two, we unequivocally share the goal of the U.S. Catholic 

Bishops to uphold religious liberty and will continue to work with 

18 

the USCCB towards that goal. Any representation to the contrary 

is false.’’ 

[The information follows:] 

19 


77557.011
20 

Mr. PITTS. Now the Chair recognizes the ranking member, Mr. 

Pallone, for 5 minutes for questions. 

Mr. PALLONE. Thank you, Mr. Chairman. 

Madam Secretary, I apologize but I have to try to get in two 

questions, one on Children’s Graduate Medical Education and the 

other is on cosmetic user fees, so if I cut you short on the first one, 

it is only because I want to get to the second one. 

I want to say I am pleased that the administration has come to 

its senses and included funding for the Children’s Graduate Medical Education, or CHGME, in this year’s budget. However, I am 

dismayed that the White House only proposes $88 million, approximately one-third the amount which Congress appropriated for the 

program last year. As you know, there are serious national shortages in many pediatric specialties, shortages which the CHGME 

program has been crucial in helping to address. Children’s Specialized Hospital in New Jersey has told me that significant reductions 

to the program would exacerbate these shortages and create additional barriers to access to specialty care for children. 

So I wanted to ask you, if the CHGME is not adequately funded, 

which obviously I don’t think it is, how do you expect to train these 

providers, not only for the shortage in primary care pediatrics but 

also in the specialties with this level of funding essentially? 

Ms. SEBELIUS. Well, Mr. Pallone, we have had this discussion before, and I know we share your interest in training of primary care 

providers and particularly pediatric providers. There are other 

streams of funding available. We are trying to use what are relatively limited resources to focus on a broad array of primary care 

training programs, and in a better budget time, we clearly would 

have proposed additional resources but this reflects tough decisions 

made at a very difficult time. 

Mr. PALLONE. No, and I appreciate that. I just wanted to stress 

that I just don’t think the investments in the pediatric specialty 

loan repayment program alone will be enough to compensate for 

the cuts, and I know that the budget eliminates the IME costs and 

only funds the direct medical expenses for pediatric GME, but the 

problem is, and again, I am very conscious of this and I am not 

saying this to you personally, but I always think that we worry 

about adults, particularly senior citizens, and then at the same 

time we were not doing what we should for kids. And so the administration has not proposed to completely cut the IME funding for 

adults in the Medicare population but eliminates this funding that 

directly benefits the health of kids, and it just seems like the kids 

are always taking the back seat. It is not just here, it is in so many 

other aspects of the budget, and I just think the consequence of 

that is that, you know, we are really going to threaten the already 

vulnerable pediatric health care workforce. 

But let me get to my second question on cosmetic user fees. The 

President’s budget for the FDA includes a proposed new user fee 

that would address cosmetic safety, and that fee would cover activities relating to the establishment of registration fees, cosmetic 

standards and refine inspections and sampling of imported and domestic products. You know that myself, Mr. Dingell and Mr. Waxman have been working on a proposal that would require registration of cosmetic facilities and listing of products requiring substanVerDate Aug 31 2005 11:16 Jun 18, 2013 Jkt 037690 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 F:\112-12~2\112-12~1 WAYNE
21 

tiation of the safety of cosmetic products, requiring adverse-event 

reporting and giving FDA the authority to recall cosmetic products. 

It is obvious the administration agrees that the cosmetics program 

is in need of resources because your budget includes fees for activities like registration and standard setting, but if we were to adopt 

my proposal and add on more responsibilities in the cosmetic area, 

do you agree that there would be an even greater need for additional fees? That is my question. 

Ms. SEBELIUS. Mr. Pallone, we do share your interest in this important area. I think that the fees in the budget would support, according to the FDA, a cosmetic registration program. We would be 

very eager to work with you looking at other areas that might be 

appropriate but are reluctant to do that without additional resources, giving the FDA lots of assignments without the resources 

to carry them out effectively. But this is an area that I think needs 

attention, which is why the President has proposed the cosmetic 

registration program and it would allow us to implement and 

standardize and collect information that just isn’t available right 

now for consumer safety. 

Mr. PALLONE. And I appreciate that. I mean, we all want the 

FDA to do a good job ensuring the safety of cosmetic products, and 

I think it is critical that we ensure that they have the resources 

to do it, and I appreciate your—— 

Ms. SEBELIUS. And we would be eager to work with you to do 

that. 

Mr. PALLONE. Thank you. 

Thank you, Mr. Chairman. 

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

the chairman of the full committee, Mr. Upton, for 5 minutes for 

questions. 

Mr. UPTON. Thank you, Mr. Chairman. 

Welcome, Madam Secretary. A couple things that I would like to 

ask this morning. I am seeing different numbers in the 2013 budget than the spending levels that you provided to the committee a 

year ago, and I don’t know if you want to respond by letter in response back, but let me just walk you through a couple things. Last 

year, you stated that HHS was estimated to spend $400 million on 

State exchange grants in fiscal year 2012 but according to your latest budget, your department will have spent $900 million plus on 

these very same grants in fiscal year 2012, more than double your 

estimate from a year ago. Is that correct? 

Ms. SEBELIUS. Mr. Chairman, we have spent so far out of the allocation 2 years of a billion dollars about $475 million, and 261 of 

that was spent by HHS. 

Mr. UPTON. No, this is specifically the State exchange grants. 

Ms. SEBELIUS. Oh, the State exchange grants. 

Mr. UPTON. You might want to come back to us. 

Ms. SEBELIUS. And I would be happy to get back. I want to make 

sure we get all these details. 

Mr. UPTON. As a former budget official, we look forward to a 

written response. 

Now, Congress in the President’s health care law appropriated a 

billion dollars for the implementation yet in this year’s budget you 

estimated that the fund will be exhausted by the end of 2012 and 

22 

you have asked for another billion to implement the law. Is that 

correct? 

Ms. SEBELIUS. Yes, Mr. Chairman, and that is the question I was answering. I apologize. We had an original $1 billion in the Affordable Care Act when it was passed. 

Mr. UPTON. Now it is two. 

Ms. SEBELIUS. Pardon me? 

Mr. CHAIRMAN. And now it is two. 

Ms. SEBELIUS. Well, the CBO estimate in March of 2010 was 

that it would cost about a billion dollars a year to implement. We 

have actually well underspent that estimate so we are now in fiscal 

year 2012. We have spent at HHS about $261 million, total with 

our other agency partners of $475 million but we think by the end 

of 2012 that original billion dollars will be spent and 2–1/2 years 

will have expired. So we are significantly underspending what the 

estimates were. 

Mr. UPTON. Let me put this then in writing and let me point 

some of these out. I want to get to a question as it relates to my 

State and my district. 

This committee, we received a memo from CRS, Congressional 

Research Service, outlining possible penalties for religious employers if they failed to comply with the HHS mandate to cover drugs 

and services that they have religious or moral objections toward, 

and according to CRS, those penalties of $100 per day per affected 

individual could be levied against the institution for following their 

conscience. In my State and in my district, I have a hospital, 

Borgess Hospital, a pretty large institution. It is part of the Ascension Hospital System in Michigan. They employ throughout the 

State 31,000 people. So according to this CRS memo, Ascension is 

likely to be subject to fines of over a billion dollars—that is B as 

in big—because of that mandate. So my question, Ascension, like 

many religious-affiliated organizations in fact is self-insured, so the 

so-called accommodation announced by the White House on February 10th doesn’t attempt, as I understand, to address the violation of conscience against self-insured employers. So what are your 

plans for accommodating self-insured employers with conscience 

issues like Borgess Hospital? 

Ms. SEBELIUS. Mr. Chairman, the accommodation that the President talked about on the 10th of February would apply to the nonexempted employers who currently do not offer contraception because of religious objections. As you know, churches, church auxiliaries, we think many parochial and Catholic elementary schools 

and high schools are likely to already be totally exempted. Grandfathered plans are totally exempted. The accommodation—— 

Mr. UPTON. So schools are totally exempted? 

Ms. SEBELIUS. If a parochial school meets the definition that is 

in the IRS where they have a majority of Catholic employees, serve 

a majority of—or religious employees, serve a majority of—— 

Mr. UPTON. So how would this impact an institution like Borgess 

Hospital? 

Ms. SEBELIUS. Well, I am getting to that, Mr. Chairman. So that 

the rule that we intend to propose, we will propose a rule in the 

near future after reaching out and having dialog with folks. It 

would require insurance companies in a directly insured plan to 

23 

provide contraceptive coverage so that a religious employer who 

had objections would not have to either pay for or provide or refer 

people for contraception. We are confident that similar arrangements can be made with self-insured institutions who work with 

third-party administrators. There is an independent body outside 

the board. There are a variety of arrangements already in place in 

the 28 States that have this already in place, and we intend to be 

informed by that when we propose the rules. So whether it is 

through a third-party administrator, which would not be the employer group, or a side-by-side plan as operates in Georgetown or 

many other hospital arrangements, we will offer a variety of strategies to make sure that religious liberties are respected at the same 

time that millions of women who work in these institutions and 

spouses of employees and daughters of employees have access to 

these important health—— 

Mr. UPTON. I know my time is expired but I am not sure that 

that is going to work, but I yield back. 

Mr. PITTS. The Chair thanks the gentleman. We are voting. We 

are going to go one more 5-minute break and come back immediately after the vote. The Chair recognizes the ranking member of 

the full committee, Mr. Waxman, for 5 minutes for questions. 

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

Madam Secretary, welcome to the committee. 

Ms. SEBELIUS. Thank you. 

Mr. WAXMAN. I must say, in the decades that I have been in the 

Congress, you are one of the finest Secretaries we have had for 

Health and Human Services, and I am somewhat amused at the 

questions you are going to get and have already gotten today because you almost can’t win. If you came in with rules and regulations that spelled them out, you would be criticized for dumping a 

lot of regulations on the table without consulting, and now that you 

are consulting, you are being criticized for not having the rules already in place 

I know there is a lot of work to be done leading up to 2014 to 

create a transparent and competitive marketplace where consumers will be offered quality insurance products that cover their 

health care needs. Insurers, consumer groups, States and others 

have been encouraging the administration to share their thoughts 

early to allow for maximum planning and preparation. I recognize 

the need to share information early. I also recognize the need to 

work through issues thoroughly. That is why I was pleased with 

the issuance of subregulatory guidance on the formation of the essential health benefits package and on the actuarial value and cost 

sharing and qualified health plans. This starts the conversation 

early. It allows for input before more formal and lengthy rulemaking is released. You have been criticized for this position, 

wrongly, in my view. Can you tell us what you see as the advantage of this approach and confirm whether you intend to continue 

towards formal notice and comment rulemaking process? 

Ms. SEBELIUS. Mr. Waxman, I think you have spelled out what 

has been part of the strategy, which is to actually put in place 

around framework issues where States need to know, so we do 

have proposed rules, in answer to the chairman’s questions earlier, 

around the exchange setup. We have proposed rules for Medicaid 

24 

expansion, both of which were informed by active conversations 

from the States. We have now put out lengthy guidance on a strategy toward the essential health benefits and are having many conversations trying to reach the balance between affordable coverage 

and comprehensive coverage, making sure that we are mindful of 

the law but know that having a product priced and able to be operated in a State is also an essential piece of the puzzle. So we fully 

intend to put out interim rules and final rules. You can’t enforce 

without final rules in place. But we want to be informed by State 

insurance commissioners, employers on the ground, our colleagues 

in governors’ offices across this country, and that dialog is very—— 

Mr. WAXMAN. Well, that sounds like to me a very reasonable approach. 

This hearing is about the budget, although you are going to be 

asked about the budget, although you are going to be asked about 

everything, but the budget includes important funding to ensure effective administration of Medicare, Medicaid, child health program, 

continued implementation of the health care law. The budget request includes an increase of a billion dollars over the fiscal year 

2012 level. That includes a request for $864 million for establishing 

insurance exchanges in the States. 

Now, it is essential that Congress meet the President’s budget request. Some of my colleagues may wish to deny your agency this 

funding in an effort to halt the progress of the health reform law. 

I think this political approach would jeopardize all the progress we 

made. More than 2.5 million young adults under the age of 26 now 

have health insurance under their parents’ plan. More than 85 million people including those in Medicare and private health insurance plans have access to free preventive coverage. More than 30 

States have begun to plan health exchanges, helping make good on 

the promise of affordable coverage for all, and more premium dollars going to health benefits, not corporate overhead. So this will 

help consumers get the value for their dollar. 

Can you address the critics that are claiming that your budget 

request for implementation money for the Affordable Care Act is a 

wasteful overspending by the government? Can you describe the 

kinds of initiatives that money will be used for? 

Ms. SEBELIUS. Well, Mr. Waxman, the additional billion dollars 

in Medicare and Medicaid is for really two categories. One is about 

$800 million that actually is for the one-time build-out of the federally operated exchange program—IT, consumer outreach, the variety of services that will be needed for those areas in the country 

where the State has chosen not to set up a State-based exchange 

or wants a State-based exchange in partnership with the Federal 

government, and we will be picking up the other pieces. So part of 

the dollars are for that. Part of the dollars actually about $200 million are directed toward increases and enhancements in the Medicare and Medicaid programs themselves. So the overall administration of these two efforts where we have about 118 million people 

currently enrolled in either Medicare or Medicare and needs to continue to update. I will tell you, Mr. Chairman, even with that additional request, our overall administrative costs for the largest insurance programs in the world are running just under 3 percent, 

even with that billion-dollar increase. 

25 

Mr. WAXMAN. That is very impressive. Thank you. 

Mr. PITTS. The Chair thanks the gentleman. The committee will 

stand in recess until the end of the last vote, and we will reconvene 

immediately. The committee stands in recess. 

[Recess.] 

Mr. PITTS. The committee is reconvened, and the Chair recognizes the vice chairman of the subcommittee, Dr. Burgess, for 5 

minutes for questions. 

Mr. BURGESS. Thank you, Mr. Chairman, and Secretary, welcome 

back to our committee. 

I have a lot of stuff to ask today. I know we have 5 minutes, so 

I will of necessity be having to submit a lot of questions for the 

record and I really would appreciate a thoughtful yet timely response to those questions, but let me follow up on where Chairman 

Upton was going a few moments ago. We have got the 2013 budget 

from the President on the Refundable Premium Assistance Tax 

Credits, and the line items between the fiscal year 2012 budget as 

submitted and the fiscal year 2013 budget as submitted are different year by year, and in fact, the total increase in this year’s 

President’s budget is $111 billion. So what has happened that accounts for this change? Are you having to reassess the number of 

people that perhaps might be driven out of employer-sponsored insurance onto an exchange? 

Ms. SEBELIUS. Mr. Burgess, the one issue that I think has 

changed definitively is that there was a legislative change dealing 

with the adjusted gross income for people in Medicaid versus the 

exchange, which we feel will actually have an impact on fewer people eligible for Medicaid and more people eligible for the exchange. 

Much of the changes in those numbers are also again in the Treasury Department budget, not in our budget. I would be glad to get 

you a very specific answer in writing but I am not as familiar with 

some of the Treasury issues, but I can tell you that legislative 

change has impacted the estimates of how many people will be eligible for the exchange, the MAGI rule. 

Mr. BURGESS. Fair enough, but this is a budget hearing and that 

is a 30 percent increase and—— 

Ms. SEBELIUS. I just—— 

Mr. BURGESS. We would like—— 

Mr. SEBELIUS. There is a legislative change. I would be delighted 

to get additional details from the Department of Treasury. 

Mr. BURGESS. From the standpoint of the oversight function of 

this committee, I think we have to have that. 

Now, speaking of the Treasury, can you give us a line item on 

how much money has been transferred to the Internal Revenue 

Service for their role in the Affordable Care Act? 

Ms. SEBELIUS. Mr. Chairman, let me see if I can get the Treasury number up. I know that of the $474 million, $261 million has 

been spent by our department, and the rest is our partners. Treasury dollars, we have transferred $210 million to the Treasury Department. In terms of how they have allocated those funds, I cannot answer that question. 

Mr. BURGESS. And that was my next question. Do you require for 

them to provide you with the allocation numbers? 

Ms. SEBELIUS. Yes, we do. 

26 

Mr. BURGESS. And when do you expect to receive those from 

Treasury? 

Ms. SEBELIUS. Again, I would be happy to get you that answer in writing. I know that is $210 million, and I will give you the detailed report of what we have so far. 

Mr. BURGESS. I think it is important. 

Ms. SEBELIUS. We get a quarterly report from them in terms of 

how they are expending and what dollars, and I would be happy 

to answer that for you. 

Mr. BURGESS. Well, they are your partners on this. After all, they 

are the enforcers who are going to enforce the individual mandate, 

so I think it is important that you share that information with the 

committee. 

Now, last year, you were asked whether Section 1311(h) of the 

Patient Protection and Affordable Care Act provided you the authority to exclude doctors and other health professionals from participating in exchange plans. Are you prepared to answer that 

question today? 

Ms. SEBELIUS. Sir, what is the question? 

Mr. BURGESS. Section 1311(h) of the Patient Protection and Affordable Care Act that deals with exchanges, (h) starts out, ‘‘Beginning January 1, 2015, a qualified health plan may contract with— 

it goes through A, which is hospitals. Paragraph B is ‘‘may contract 

with a health care provider only if such provider implements such 

mechanisms to improve health quality as the Secretary may by regulation require.’’ So are you prepared to exclude providers from the 

exchange? Are you developing that set of criteria? Are providers to 

see the day soon where they would be prohibited from participating 

in an exchange if they don’t comply with all the things that you 

set forth? 

Ms. SEBELIUS. Mr. Burgess, we see that issue as one that at the 

State level will be decided between the board of the exchange and 

the issuers who—— 

Mr. BURGESS. How about a State that doesn’t do an exchange? 

My State is not right now, as you know, and there will be a Federal exchange. 

Ms. SEBELIUS. Pardon me? 

Mr. BURGESS. And there may be a Federal exchange if we can 

get through the problems with the tax code. 

Ms. SEBELIUS. We will again make decisions at the Federal exchange level about which issuers who have networks of their own 

to include based on their quality performance, based on their—— 

Mr. BURGESS. But the Congress in its wisdom said that you 

would decide, not that the State would decide. 

Ms. SEBELIUS. I am telling you, for the Federal exchange, we will 

be making decisions about issuers. We do not intend to reach into 

a State exchange. They will be making the determinations at the 

State level. 

Mr. BURGESS. Well, are you asking us for a change in legislative 

language in the Affordable Care Act to allow you the freedom to 

do that? 

Ms. SEBELIUS. I am not, Mr. Burgess. 

Mr. BURGESS. But it says in statute that you will make that decision, correct? 

27 

Ms. SEBELIUS. Well, I am just telling you how I will make the 

decision. We will be working with the State-based exchanges so 

they will make determinations based on their issuers. If for some 

reason there was an outlier, we could have a conversation, but we 

intend to work with the States as the law intends so the State will 

set up a State-based exchange. We will at the same time be establishing a program for a Federal exchange. 

Mr. BURGESS. And will you exclude providers from an exchange? 

Ms. SEBELIUS. This is not an issue of providers, this is an issue 

of which plans will be able to be operated. Plans have their own 

networks, and we will be—— 

Mr. BURGESS. So if you don’t belong to a particular ACO, you 

may not be able to see your patient of long standing. Is that correct? 

Ms. SEBELIUS. Mr. Burgess, that is not at all what I said. Clearly, determinations will be made about how many providers, how 

many plans. 

Mr. BURGESS. We might infer that from what you said. 

Mr. PITTS. The gentleman’s time is expired. 

Mr. BURGESS. I thank the Chairman. 

Mr. PITTS. The Chair recognizes the gentlelady from California, 

Ms. Capps, for 5 minutes for questions. 

Mrs. CAPPS. Thank you, Honorable Kathleen Sebelius, Secretary 

of Health and Human Services, for your testimony. 

You know, we are all so aware of the challenging economic climate in which we are living. However, I believe on the whole that 

the President’s budget does strike an important balance between 

curbing spending and promoting the public’s health. As a nurse, I 

know that we cannot reach our health care goals without a strong 

health care workforce made up of a range of health care professionals. So I would like to ask a couple of questions, if you could 

discuss briefly what steps have been taken in the budget to ensure 

that we have a health care workforce well equipped, diverse and 

large enough so as to help us successfully reach these goals. It is 

a tall order. 

Ms. SEBELIUS. Well, I think you are absolutely right, Ms. Capps, 

about the workforce being a critical part of this effort to transform 

the health care system, and certainly primary care providers become essential, not just physicians but nurses, nurse practitioners, 

mental health technicians, dental assistants. We are very pleased 

that this budget continues the progress we have made. So far in 

this administration, we have tripled the number of National Health 

Service Corps providers. This budget intends to continue the training of 7,100 new health care providers who will be serving in the 

most underserved areas, and I have the privilege of meeting with 

some of these young people every day who are thrilled with the 

idea they can both provide service to their communities or underserved communities as well as having their loans paid off so they 

don’t emerge with so much debt. 

We are also, as you know, part of the Affordable Care Act is encouraging more providers to deal with Medicaid patients so changing Medicaid rates to Medicare, using our graduate medical resources to focus on slots for primary care, so we are very aware of 

the looming issue. If we are going to change from a sick care sysVerDate Aug 31 2005 11:16 Jun 18, 2013 Jkt 037690 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 F:\112-12~2\112-12~1 WAYNE
28 

tem to a health care system, the primary care workforce and an additional community care workforce is essential, and we are trying 

to use all the leverage that we have, many of which were part of 

the Affordable Care Act. 

Mrs. CAPPS. Thank you. And I want to just highlight the commitment to the nursing workforce, which has clearly been expanded in 

the Affordable Care Act including funds to train advanced practice 

nurses, which can take some of the expensive care costs away and 

transform them into excellent care that can be delivered by nurses 

and others. 

I am going to be circulating a letter in support of these nursing 

programs and urge my colleagues to join me in support of them. 

Just one other topic I would like to get to. In addition to a robust 

health care workforce, we all know that improving public health requires investments in research, in development and in innovation. 

However, during the recent economic downturn, I have heard from 

researchers, many in my district, about the lack of reliable grant 

funding now available, especially in the private sector. And this 

limits their ability to pursue the kind of scientific achievements 

and advancements that we need, and I think it also highlights the 

importance of the National Institutes of Health, NIH, which has 

traditionally been such a bipartisan issue. The President’s budget 

only includes flat funding for NIH. However, reports indicate that 

management streamlining is going to free up money for 8 percent 

more grants to be awarded. Would you please expound on that a 

bit and explain what will go into that process and how it can actually improve the economic situation in many of our Congressional 

districts? 

Ms. SEBELIUS. Well, I certainly share your view that biomedical 

research is a critical component of not only saving lives but lowering costs and improving strategies so that the leadership at the 

National Institutes of Health led by Dr. Francis Collins I think 

have reorganized the resources at that very critical institution so 

that we anticipate with this budget funding 672 new research 

grants. New research grants will be funded. 

Mrs. CAPPS. Wow. 

Ms. SEBELIUS. About a 7.7 percent, almost an 8 increase in current grant funding. As you know, there is also a new Center for 

Translational Science thanks to work that we were able to do with 

Members of Congress that focuses on some of the most promising 

areas, a Cure Acceleration Network that is in place, again, moving 

resources to the most promising strategies. So yes, funding is flat. 

About 40 percent of our discretionary budget is in the National Institutes of Health so we found ways to make sure that those critical 

programs go on and I would say that the administrative costs will 

be diminished and more of those resources will be focused on the 

research that needs to go forward. 

Mrs. CAPPS. Thank you very much. 

Mr. PITTS. The Chair thanks the gentlelady and recognize the 

gentleman from Kentucky, Mr. Whitfield, for 5 minutes for questions. 

Mr. WHITFIELD. Madam Secretary, in the health care act, 2010– 2011, it provided for basically $1,250,000,000 for the Prevention 

Fund, and under the Prevention Fund, you have the authority I 

29 

guess almost unilaterally to move that money into various accounts 

at HHS. So I would like to ask you to provide to the committee for 

the year 2010 and 2011 the amounts of money that were transferred to which particular accounts, and then from those accounts 

if grants were made to grantees around the country, the name of 

the grantee, the amount of the money, the purpose of the grant and 

the date of the grant. Would you be able to do that for us? 

Ms. SEBELIUS. I would be happy to do that. 

Mr. WHITFIELD. Thank you. Thank you very much. 

Now, one of the things that is a little bit troublesome to me in 

the President’s 2013 budget is that he in essence eliminates part 

of the anti-lobbying provisions of the use of Federal funds. As you 

know, in the appropriation bills since the mid-1970s, we have had 

prohibitions against using Federal funds for lobbying, and to define 

it more specifically, prohibits using Federal funds to influence in 

any manner an official of any government to favor, adopt or oppose 

by vote or otherwise any legislation, law, ratification or policy. Why 

would the President want to omit that from his fiscal year 2013 

budget? 

Ms. SEBELIUS. Mr. Whitfield, I have to confess, I am not sure exactly what is being referred to. I know that our fiscal year 2012 

budget, our budget, and there may be other statements in other 

budgets that I am not as familiar with, but our fiscal year 2012 

budget actually included additional lobbying restrictions which we 

are actively working to comply with which not only apply to our department, which have been in place traditionally for years and we 

have complied with in terms of lobbying but also now apply to 

downstream grantees who receive money through the Prevention 

Fund. So we are updating our grant language, enhancing our oversight of grantees, retraining—— 

Mr. WHITFIELD. Well, I mean, I—— 

Mr. SEBELIUS. So I am not—— 

Mr. WHITFIELD. I think that is commendable and I do appreciate 

it, but the prohibition has been very specific about using those 

funds at the Federal level, State level or local level, and the President explicitly in his 2013 budget allows those funds to be used at 

the local level, and my question to you would be, do you know why 

that action was taken by the White House? 

Ms. SEBELIUS. Again, I would be—I will provide a more thorough 

answer in writing. What I have just been told by our staff is that 

the language that we are proposing be eliminated is duplicative of 

existing law, that it already exists in statute. I will verify that and 

get back to you, but I am not aware of any new measures that we 

are talking about. 

Mr. WHITFIELD. So from your perspective, you are already doing 

that? 

Ms. SEBELIUS. That is what—— 

Mr. WHITFIELD. Now, the reason I am asking the question is because I have seven pages here of 25 specific instances where grantees of HHS receiving money from HHS are explicitly trying to influence laws at the State and local levels relating to all sorts of 

issues. For example, in one town in California, Baldwin Park, they 

are using these—the entity, the grantee, is using this money to reduce the density of fast food establishment and convenience stores, 

30 

for example, and we have seven pages of this, and it looks to me 

just on the surface that it is explicitly violating the law as set out 

in the Appropriation Act. 

Ms. SEBELIUS. Again, Mr. Whitfield, the new language in our 

budget for fiscal year 2012, we have not issued any new grants 

where that new language would be applicable. We are updating our 

grantee advice. We are updating but the prospective language has 

not impacted any of the grants in place. We are going to comply 

with the law. The language that has been statutory applied to our 

use of our Federal funds. We have also complied with that law for 

years. So I can assure you that the new language attached to the 

fiscal year budget, and it did go beyond statutory language, is one 

that we are currently updating and updating grantees about but 

there have been no grant releases where that new language would 

apply. 

Mr. WHITFIELD. Mr. Chairman, I might just make the comment 

that it was my understanding that this prohibition also applied to 

fiscal year 2010 and 2011, so—— 

Ms. SEBELIUS. Not by grantees, Mr. Whitfield. It applied to us 

but not our grantees. 

Mr. PITTS. The Chair thanks the gentleman. 

The gentlelady from Illinois, Ms. Schakowsky, is recognized for 

5 minutes for questions. 

Ms. SCHAKOWSKY. Thank you, Mr. Chairman. 

Just in regard to family budgets, I wanted to point out and thank 

you for the fact that 54 million Americans were provided at least 

one preventive service in 2011 through their private health insurance plan for no cost, and I think that the consequences of that are 

probably priceless in terms of colonoscopy screenings and flu shots 

and all the disease that has been prevented, so this is one of the 

consequences of the Affordable Care Act. 

But I also wanted to tell you that I had the privilege of going 

out with the Fraud Prevention and Enforcement Action Team on 

a drive-around, which was very interesting, where there is this real 

effort to make sure that we are spending all the taxpayer dollars 

correctly, although we didn’t have anything quite as exciting as 

what we learned earlier this week about a Dallas doctor arrested 

for a shocking $375 million in health care fraud schemes. 

So what I wanted to ask is how the Affordable Care Act contributed to greater oversight and enforcement and what kind of additional—how much money was found through that effort, and that 

is it. 

Ms. SEBELIUS. Well, Ms. Schakowsky, I think there is no question that the Affordable Care Act contains provisions that are probably the toughest anti-fraud provisions ever in the history of the 

Medicare program. Criminal penalties were enhanced. Civil penalties were enhanced. We were given tools to re-credential providers in some of the most fraud-ridden areas, new resources for 

these law enforcement teams that are a Justice Department-HHS 

partnership on the ground. We now have teams in seven cities. We 

are expanding to nine. We intend to continue that. Probably as important as anything are the resources that allow us to for the first 

time ever catch up with the private sector and put together a data 

system where real data is pulled together in real time. In the past, 

31 

12 different billing systems had various parts of CMS billing data 

so you could never identify the provider in Texas in one space. It 

was coming through too many portals. So data analysis is now in 

2 years significantly better than it was in the past and we now 

have a predictive modeling system to look at billing errors—not errors, billing anomalies and be able to target our resources on the 

ground to immediately investigate and stop money from going out 

the door. 

So the Attorney General and I were able to announce a couple of weeks ago that $4 billion, the largest amount ever, came back 

to the taxpayers and to the trust funds because of these anti-fraud 

efforts, and yesterday alone, as you identified, a provider—I am 

sorry—on Tuesday in Texas, a provider was arrested who has been 

fraudulently billing we think 28 or 29 home health agencies. We 

knew that that was an area fraught with problems and we targeted 

that area, used the new analytics, identified this provider, but I 

think it is the first of many, many that will follow. 

Ms. SCHAKOWSKY. So did the additional resources and tools in 

the ACA, was it responsible for this increase in recovery, the $4 billion that were recovered? 

Ms. SEBELIUS. I think it was enormously helpful. There is an ongoing underlying fraud program but the new resources and the new 

tools we have allowed us to for the first time put together some of 

these technology advances that really have been used by the private sector very effectively for a long time but missing in our critical health care programs. 

Ms. SCHAKOWSKY. In the moments remaining, there are two 

issues that I would like to work with you and your staff on. One 

is, Medicare beneficiaries are often designated as being in the hospital on an outpatient observation status, and they could be in the 

hospital up to 3 days or whatever under that status, and they are 

not really admitted as an inpatient, and this affects when they are 

sent to a nursing home or put in an ambulance, and often they 

don’t really understand what observation status is. You are in a 

hospital bed. You think you are in the hospital. You think you have 

full insurance coverage. I would like to work with you on that. 

And the other is, the important information, Hospital Compare, 

that is a useful tool for consumers, but there is also the feeling that 

some of the safety-net hospitals for reasons, for example, dealing 

with non-English speakers, that their ratings get lowered and that 

concern has been brought to me. I would like to work with you on 

this. These are little tweaks that I think we can fix. And I want 

to thank you for the fact that you are working with the States, you 

are working with Members of Congress to make this a better bill 

and a better policy. Thank you. 

Mr. PITTS. The gentlelady’s time is expired. 

The gentleman from Michigan, Mr. Rogers, is recognized for 5 

minutes for questions. 

Mr. ROGERS. Thank you, Mr. Chairman. 

Madam Secretary, thank you for being here. I have been working 

with my Democratic colleague Anna Eshoo on the BARDA reauthorization bill. I would hope that we could submit some questions 

for the record. It is very important to us and I know it is important 

to you. 

32 

Ms. SEBELIUS. That would be great. 

Mr. ROGERS. And we look forward to working with you on that. 

In the 2013 budget, how many employees are dedicated and committed to getting the health care law up and implemented and coordinated with the States? 

Ms. SEBELIUS. I do have those numbers here if you could give me 

just a moment to make sure I give you the accurate number. We 

have 210 people in the division that is specifically working on exchanges, health insurance reform and others. We have about another 146 working on the parts of the Affordable Care Act relating 

to Medicare and Medicaid, and then some department-wide folks 

who have picked up basically some of this effort, so about 800 people throughout CMS are actually dedicated to this effort. 

Mr. ROGERS. And do you expect that number to rise in future 

budgets just for the implementation and management and regulatory administration of the health care law? 

Ms. SEBELIUS. And this is an fiscal year 2013 number that we 

are supporting so it includes any increase that we are seeing right 

now. A lot of what we are doing I think is covered by the folks that 

we have. 

Mr. ROGERS. So my concern was, when the chairman went 

through, and there is no Federal-State exchange rule, there is no— 

for States—excuse me. There is no Federal exchange rule. There is 

no guidance and rule on what is an accredited health plan, nothing 

that outlines benefits. We have about 18 months. And my concern 

here is—and I understand what you have been saying, but we have 

insurance agents who have been a bastion for small business being 

laid off. As a matter of fact, I had 150 workers at one company, 

30 of which were in my district alone, we think there are thousands and thousands across the country, because I think the Medical Loss Ratio rule is wrong. We have a very bipartisan effort to 

fix it. Can you commit to fixing that today? 

Ms. SEBELIUS. We are following the guidance from the very bipartisan National Association of Insurance Commissioners. We 

adopted their rule on the MLR and we intend to stay with their 

rule. 

Mr. ROGERS. So it is OK that we are going to continue to lose 

these jobs and we are losing them today, we are going to lose more 

tomorrow, and these are the very people who are going to try to 

make some sense out of this massive set of rules that is only going 

to give them a matter of months before they are fined by the Federal government. You understand why I am concerned, I think. 

Ms. SEBELIUS. Well, I think that there is a slight 

mischaracterization about our progress on the rules. We do have a 

proposed rule that is out, has been for months, on the framework 

of the exchange, on—— 

Mr. ROGERS. But I understand that, but—— 

Ms. SEBELIUS [continuing]. Medicaid. We have a very detailed 

bulletin—— 

Mr. ROGERS. And reclaiming my time. I get it. I have heard your 

answer on that earlier. That does nothing if you are the person 

who actually has to raise the money, sell the money—excuse me— 

sell the product, raise the money, hire the people. A proposed rule 

does nothing for certainty for me, nothing, and so here is, I guess, 

33 

my point: It doesn’t seem like there is any sense of urgency about 

what is going to hit these very companies who are fighting for their 

very survival, and the one sector of that that was at least going to 

give them some guidance are now eliminated. The Federal Government by that law and by your rule eliminated these broker agents 

from even having the opportunity to show up at the small cafe and 

say let me guide you through this before you get slapped with a 

$2,800 fine. 

Ms. SEBELIUS. But there is no elimination of brokers and agents, 

and having served as insurance commissioner, I can guarantee you 

that—— 

Mr. ROGERS. Reclaiming my time—— 

Ms. SEBELIUS [continuing]. They are valuable folks. 

Mr. ROGERS. That is great, except they are losing their jobs. 

Ms. SEBELIUS. The Medical Loss Ratio in no way eliminates brokers and agents. It didn’t define brokers and agents—— 

Mr. ROGERS. It just adds to their costs so they are eliminated 

through the back door, and Secretary, that is—— 

Ms. SEBELIUS. Exchanges at any point along the way can—— 

Mr. ROGERS. We ought to at least just be frank with each other 

and admit the fact that these brokers are going away. Yes, the law 

didn’t directly say you are going away but the impact of this law 

is, they are going away. I am very, very concerned. 

Let me get to the second part here. I don’t have much time left. 

Thirty percent of doctors according to the AMA have already said 

they are restricting the number of Medicare patients in their practices. Two-thirds of physicians have looked into opting out of Medicare for treating patients. We see this huge cultural shift in the 

practice of medicine. They are selling to hospitals at an alarming 

rate. Costs go up. They are reducing the number of appointments 

per week for senior citizens and they are stopping to take new patients. How are you going to stop this and fix this for the future? 

This is a disaster for our seniors and it is something I hope you 

are spending a lot of time trying to get right. 

Ms. SEBELIUS. Well, I think the best way to actually make sure 

that the 97, 98 percent of doctors who currently have contractual 

arrangements with Medicare continue those contractual arrangements is a long-term discussion and actual fix of the payment rate, 

which over the last 3 years expires a week at a time, a month at 

a time, a year at a time. The President has proposed in his budget 

and paid for in his budget a 10-year fix for the Sustainable Growth 

Rate. That is the biggest issue that I hear day in and day out from 

physicians practicing is, they don’t know if they are going to get 

paid. Being a good payment partner for the 48 million Americans 

who rely on Medicare benefits I think is the most essential thing, 

and we would love to work with Congress to get that done long 

term. 

Mr. TERRY. And I would agree with you on that. Also, if you talk 

to those doctors, the Medicare health care bill has made it almost 

impossible for them to survive. 

Ms. SEBELIUS. The Medicare health care bill? 

Mr. ROGERS. No, excuse me, the health care law, which is why 

you see this cultural shift in the way medicine is practiced. 

Mr. PITTS. The gentleman’s time is expired. 

34 

Mr. ROGERS. And I hope that you get a sense of urgency on this, 

because people are impacted today. 

Thank you. I yield back my time. 

Mr. PITTS. The gentleman’s time is expired. The Chair recognizes 

the gentleman from New York, Mr. Engel, for 5 minutes for questions. 

Mr. ENGEL. Thank you very much, Mr. Chairman. 

And Madam Secretary, I want to echo the remarks that Mr. 

Waxman made. I think you are doing a fine job as Secretary and 

I want to thank you for the job and the good work that you do. 

I am very proud of the fact that my State, New York, trains the 

largest number of medical residents in this country. We have over 

15,000 residents developing all kinds of lifesaving skills in our 

State as of 2010 and New York also trains the largest number of 

primary care physicians in the country. Given the increasing age 

of our Baby Boomer generation and 32 million newly insured 

Americans projected to enter into our health care system in the 

next few years, I am concerned about the significant physician 

shortage that this country is facing. 

So I want to echo the statements that Mr. Pallone made earlier. 

I was disappointed to see that the President’s budget included a 10 

percent cut to indirect medical education funding and $177 million 

cut to children’s hospital graduate medical education funding. I 

think we need to be training more physicians and adequately supporting our teaching hospitals, not cutting their funding as they 

strive to train more providers. Hospitals already see significant 

cuts to bad-debt and DSH payments, which disturbs me greatly because we fought for DSH payments for New York in the Affordable 

Care Act. So as a result of H.R. 3630, the Middle Class Tax Relief 

and Job Creation Act, bad-debt cuts and DSH payments cuts are 

there. So I would just ask that the administration reconsider additional cuts, especially when it comes to training our physicians. 

Ms. SEBELIUS. Well, again, I share your feeling that a critical 

piece of this puzzle for the United States having better health care, 

better patient care, better health is certainly a robust workforce focused on prevention and so we would work with you to make sure 

that we are using all of the assets, all of the resources to do just 

that. 

Mr. ENGEL. Well, on prevention, one of the best parts of the Affordable Care Act, I think, was the establishment of the Prevention 

and Public Health Fund. I think that should be a priority, and I 

was also disappointed to see that significant reductions were made 

to various HHS agencies including the CDC as part of the budget 

request. The rationale which we read was that the Prevention 

Fund would help fund these programs facing cuts, but the point of 

the Prevention Fund was to add to the budgets of various public 

health programs, not to just supplant their existing funding. So 

given the fiscal year 2013 budget request and in light of the fact 

that the Middle Class Tax Relief and Job Creation Act cut over $5 

billion from the Prevention Fund, I am concerned that we won’t be 

able to fulfill the goals of the Prevention Fund. So could you please 

explain how the various programs facing cuts, especially those at 

the CDC, will be impacted, given the payroll tax extension legislation which is now law? 

35 

Ms. SEBELIUS. Well, I think that we are eager to not only have 

the basic programs of the Centers for Disease Control and Prevention continue on, they are vital, they are vital to States around the 

country. They are vital to the health of all Americans and some of 

the prevention funding, you are correct, is paying for those ongoing 

programs. I would say that also there are some innovative and new 

programs that are showing great promise that also are part of that 

prevention funding and we are going to, now that we have an outline for the further reduction of $250 million, be working closely 

with Congress to make sure that these initiatives don’t take even 

more disabling cuts. Unfortunately, at the State level, as you know, 

Congressman, the States have made some serious reductions in 

their public health budgets. So we are really trying to not only 

make sure that the national efforts go forward but that the State 

workers who are embedded in state departments across this country doing vital public health are also continued. 

Mr. ENGEL. I want to quickly mention dental care. In a report, 

the Pew Center says that preventable dental conditions were the 

main cause for over 830,000 emergency visits in 2009, which is a 

16 percent increase from 2006, and in New York, we estimate $32 

million was spent treating children for dental-related ailments in 

emergency rooms in 2008 alone. 

I introduced H.R. 1606, the Special Care Dentistry Act, which 

would require Medicaid programs to provide dental services to 

aged, disabled and blind beneficiaries, and I am just wondering, is 

HHS working to address the shortage of dentists in both our urban 

and rural areas, and how can we encourage more dentists to serve 

children and vulnerable adults on Medicaid? 

Ms. SEBELIUS. Well, Congressman, we would be really eager to 

work with you on this. It is an enormously challenging problem. I 

think more so than virtually any other provider group, we see a 

great shortage of dentists who are willing to participate in the 

Medicaid program. We are working actively with States and others 

to figure out strategies to engage more dentists but I would say 

that we would love to have your strategies, your ideas because it 

is a challenge in virtually every part of the country, rural and 

urban, where we see this lack of providers who actually deliver incredibly important health services. 

Mr. ENGEL. Thank you, Madam Secretary. I will be in touch with 

your office on this and another bill that I have introduced, the 

Moms and Babies Act. 

Thank you, Mr. Chairman. 

Mr. PITTS. The gentleman’s time is expired. 

The Chair recognizes the gentlelady from North Carolina, Ms. 

Myrick, for 5 minutes for questions. 

Mrs. MYRICK. Thank you, Mr. Chairman. Thank you, Madam 

Secretary, for being here. 

I want to go back to the Medicaid expansion issue again. I know 

Dr. Burgess touched on it a little bit. Beginning in 2014 under the 

health reform law, it will expand to include all non-elderly individuals with incomes below 133 percent of the Federal poverty level, 

and that accounts for more than half of the newly insured population under the law. The CBO, Congressional Budget Office, estimates that by 2022, Federal outlays for Medicaid are expected to 

36 

total $605 billion, more than twice the 2012 amount. Obviously, 

many millions of new people would be covered by Medicaid at that 

point but it certainly is a pretty disastrous budget outlook. So, as you know, the President’s budget forces about $60 billion 

worth of additional Medicaid burden on to States, and States already can’t afford their Medicaid programs. I know the problems 

we have in North Carolina. So long as the administration doesn’t 

allow the States more flexibility and insists on enrolling these millions of new Medicaid recipients, how are we going to afford as a 

country double spending on the program in less than a decade? 

And I don’t see that the budget really addresses it this year. 

Ms. SEBELIUS. Well, Congresswoman, the Affordable Care Act 

laid out a program, as you say, that in 2014 regardless of where 

an individual lives in the country, the Medicaid enrollment eligibility will be identical so that individuals up to 133 percent of poverty will qualify for Medicaid. Those up to 400 percent will qualify 

for tax credits in the exchange program. The vast majority of those 

new enrollees are paid for by the Federal Government. They do not 

add to the State budget. In fact, the first several years it is 100 

percent Federal funding. It decreases over the first 10 years so that 

the highest level a State would be paying for those additional enrollees is a 10 percent match. The Congressional Budget Office estimated that actual State expenditures on Medicaid populations 

would go down, not up, and States will also be saving what is estimated to be about $80 billion that they are spending on an annual 

basis right now in uncompensated care, having a payment system 

under a lot of the individuals who come into community hospitals, 

who come into the health system but have no payment strategy 

whatsoever. 

Mrs. MYRICK. Well, most of that money is paid by us, the Federal 

Government, when we pay the hospitals. The States don’t pay that. 

Ms. SEBELIUS. We pay some of it, but I can guarantee you as a 

former Governor, States pick up an enormous amount of that uncompensated care at the State level also. 

Mrs. MYRICK. Right. I yield back, Mr. Chairman. 

Mr. BURGESS. Would the gentlelady yield? 

Mrs. MYRICK. Yes, I will. 

Mr. BURGESS. Madam Secretary, let me just ask you, because 

when the President came out announcing the compromise a couple 

of week ago—— 

Ms. SEBELIUS. I am really having trouble. I am sorry. 

Mr. BURGESS. When the President came out and announced the 

compromise on the conscience in contraception a couple of weeks 

ago, he described that he wanted this to be free, and I got to tell 

you, I was a little taken aback by the President’s seemingly superficial knowledge of health economics. So have you tried to help educate him when things are free that they are really not free if they 

have health care or medicine stamped on the side of them? Even 

assume you get the active pharmaceutical ingredient for next to 

nothing, which under some generic scenarios you might if you were 

willing to impose a formulary on all the patients in the country, 

you still have to involve a doctor’s office. A doctor’s time is still involved with evaluating the patient and writing the prescription. A 

doctor is still going to be required to manage that patient, hear 

37 

about the complications as they occur, answer their phone calls at 

2 o’clock in the morning and the doctor still has to buy liability insurance. So none of those things looks free to me, having practiced 

medicine for 25 years. Have you tried to help educate the President 

on the fact that health care is generally not free? 

Ms. SEBELIUS. Mr. Burgess, I think what the President was referring to, and I think he understands the economics of the insurance industry very well, is that this directive first of all in the law 

is to insurers, and in an insurance pool, there is a balance of risk. 

What is estimated by actuaries, by Federal actuaries, by company 

actuaries to be free is the provision of contraception to women balanced against unintended and in some cases unhealthy pregnancies. That is not only a no cost but estimated by—— 

Mr. BURGESS. It was already working. Why did we have to interfere? Obviously it was in the marketplace in that instance. 

I yield back, Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentleman and recognizes the 

gentleman from Georgia, Dr. Gingrey, for 5 minutes for questions. 

Mr. GINGREY. Mr. Chairman, thank you. 

Madam Secretary, thank you for being here this morning. Ranking Member Waxman was quoted in The Hill newspaper yesterday 

as saying, and this is a quote, ‘‘IPAB is a useful backstop to impose 

some discipline on Congress to stop out-of-control Medicare health 

spending.’’ Do you agree with that statement? 

Ms. SEBELIUS. I do. 

Mr. GINGREY. Does the President believe we need to save the 

Medicare program from bankruptcy like Ranking Member Waxman 

obviously does and you obviously do? 

Ms. SEBELIUS. I think the President believes very strongly, which 

is why he has proposed in this budget and supported aspects of the 

Affordable Care Act—— 

Mr. GINGREY. And my time is limited, so yes or no is fine on this, 

and your answer to that is yes, and I thank you for that, Madam 

Secretary. 

Ms. SEBELIUS. I didn’t give you an answer, sir. 

Mr. GINGREY. I know the President has used the slogan we can’t 

wait to highlight Congressional inaction really on many issues. Tell 

me this, should we take Ranking Member Waxman’s advice and 

start showing discipline to reform Medicare this year or should we 

tell our seniors to wait until after the next election? Yes or no. 

Ms. SEBELIUS. The President’s budget has a very positive proposal for Medicare which not only ensures that the 48 million people have the benefits that are committed to them but that we continue to slow the growth rate, which has happened every year 

since—— 

Mr. GINGREY. Well, I understand that, and my time is limited, 

so let me just say this. I asked you the question, does the President 

think that we need to address this issue now or—— 

Mr. SEBELIUS. He would ask that you pass his budget, yes, sir. 

Mr. GINGREY. And the answer is yes. Thank you. 

Are you aware that the CMS Actuary predicts that the Medicare 

program could become bankrupt as early as 2016? 

Ms. SEBELIUS. Mr. Gingrey, I think that again action is required. 

We are taking that action. We would ask you to pass the budget 

38 

which has additional slowdown in the growth rate, adding another 

2 years to the trust fund. As you know, the Affordable Care Act 

added an additional 12 years to the trust fund and we would love 

to engage in a more comprehensive discussion as long as we don’t 

blow up the benefits that 48 million people rely on, which seems 

to be the alternative. 

Mr. GINGREY. Madam Secretary, I think I just heard you say 

that the Affordable Care Act according to the Medicare trustees 

adds another 12 years. 

Ms. SEBELIUS. It was according to the Congressional Budget Office. 

Mr. GINGREY. According to the CBO, an extra 12 years. Well, I 

think that is possibly based in part, Madam Secretary, with all due 

respect, upon your belief that $500 billion in cuts to Medicare 

under the Affordable Care Act, Obamacare, can be spent twice and 

other disingenuous accounting gimmicks. What do you say to that? 

Ms. SEBELIUS. This was not our number. It was the Congressional Budget Office number, sir, and also numbers that are included in the Republican proposal that was put forward last year. 

So there seems to be some bipartisan agreement that we could slow 

the growth rate of Medicare by $500 billion over the next 10 years. 

Mr. GINGREY. Thank you, Madam Secretary. Let me shift to the 

issue of the individual mandate. In December, actually a December 

14, 2010, editorial in the Washington Post, you wrote with Attorney General Holder, and here is what you stated, ‘‘It is essential 

that everyone have coverage. Imagine what would happen if everyone waited to buy car insurance until after they got in an accident. 

Premiums would skyrocket, coverage would be unaffordable and responsible drivers would be priced out of the market.’’ In your opinion, if the individual mandate is found to be unconstitutional by 

the Supreme Court, would premiums skyrocket or would the cost 

curve for PPACA remain unchanged? 

Ms. SEBELIUS. I can’t speculate about that but I am confident 

that given the review by the majority of justices who have looked 

at the bill that the Affordable Care Act will be found constitutional. 

Mr. GINGREY. Well, that really wasn’t my question. So in your 

opinion, is the individual mandate the linchpin to the other insurance reforms in the bill? 

Ms. SEBELIUS. I think having everyone included in the insurance 

market is an essential component. 

Mr. GINGREY. So in other words, the individual mandate is essential to ensuring that everyone has coverage and the remainder 

of the bill of course would not work effectively without that coverage? 

Ms. SEBELIUS. I didn’t say that, sir. I think it is an essential 

component of the bill. 

Mr. GINGREY. Close enough, Madam Secretary. Thank you. 

Ms. SEBELIUS. Sir, you can’t—— 

Mr. GINGREY. Let me ask you this question about Medicaid. 

Ms. SEBELIUS. Could I answer your question, or not? 

Mr. GINGREY. You did. I thank you for—— 

Ms. SEBELIUS. I did not. 

Mr. GINGREY. I thank you for your question, and I have only got 

15 seconds left, but let me address Medicaid, and this is going back 

39 

to what Representative Myrick addressed but taking a step further. 

Can you assess the impact of the provision of PPACA requiring 

States to raise Medicare primary care physician rates up to the 

Medicare level in 2013 and 2014 with Federal funding for States 

and doctors, especially in 2015 when the requirement and the funding goes away, resulting in an inevitable cut to their reimbursement? Have you thought about that? 

Ms. SEBELIUS. We would hope that Congress would work with us 

to make sure that that cut does not occur in future budgets. 

Mr. PALLONE. Mr. Chairman, can I just—— 

Mr. GINGREY. Madam Secretary, thank you, and I yield back. 

Mr. PALLONE. Mr. Chairman, I just want to ask, you know, I 

think that Mr. Gingrey was asking questions, then not giving the 

Secretary the time to answer them. I know that he has only 5 minutes, but I really think if she feels that she needs an opportunity 

to answer his questions, I don’t mind if—— 

Mr. GINGREY. You know, the gentleman, I think I need to respond to him, Mr. Chairman. You make a statement in regard to 

my approach, and Mr. Pallone, I think you spent 4–1/2 minutes of 

your 5-minute allotted time giving a speech. So when I ask questions and I want a yes or no answer, I expect a yes or no answer. 

It is my time, not hers. 

Mr. PALLONE. I didn’t—— 

Mr. GINGREY. She gave her opening 5 minutes. 

Mr. PALLONE. I understand, but if you don’t give her an opportunity to answer the question and then you go back and suggest 

what she said and she disagrees that she said that, I mean, it is 

really not an opportunity for her to respond, in my opinion. 

Mr. PITTS. The Chair thanks the gentleman and recognizes Dr. 

Cassidy for 5 minutes for questions. 

Mr. CASSIDY. Hello, Madam Secretary, how are you? 

Ms. SEBELIUS. Is that a yes or no question? 

Mr. CASSIDY. Believe me, that is a greeting, not a true inquiry. 

I can imagine how you are. 

Listen, you said something earlier to Ms. Myrick which I, you 

know, was intrigued by. You suggested that under the ACA that 

Medicaid costs for States will decrease. Now, I know I heard that. 

The reason I find that curious is the New York Times just had an 

article speaking about how Medicaid costs have gone from 21 to 23 

or 24 percent, expected to rise further. There is a blog, Ed Watch, 

Education Watch, which is, you know, obviously not even part of 

this fight except that they are saying that they anticipate continued crowd-out of funding for education by the money required for 

Medicaid expenditures. In my own State, even though you speak of 

the newly eligible having 90 percent coverage and at some point 

falling off or 100 percent falling off to 90, my own State, Louisiana, 

predicts that there will be $7 billion State general funds required 

to comply with the ACA over the next 10 years. We may quibble 

whether it is $7 billion or $5 billion but it is a significant expense. 

Now, I say that in context, and if I interrupt, I am not trying 

to be rude, it is only because we have limited, when you mention 

that the ACA is going to save the States money, that seems to be 

contrary to objective analyses from those not connected with government. 

40 

Ms. SEBELIUS. Well, Mr. Cassidy, I would love to get you a more 

detailed answer but I can tell you that part of what is going on is 

overall Medicaid expenditure and State portion of Medicaid expenditure, two very different numbers. Overall Medicaid expenditure 

will go up with a number of newly insured Medicaid beneficiaries. 

What I was referring to is the State’s share of that newly insured—— 

Mr. CASSIDY. So if I may, absolute dollars will increase even if 

these States’ percentage of that total spending decreases? 

Ms. SEBELIUS. That is correct. 

Mr. CASSIDY. But absolute dollars will still increase? 

Ms. SEBELIUS. Absolute dollars certainly, sir. If we pay 90 percent of the costs, I mean the absolute dollars are going up. 

Mr. CASSIDY. Now, the next issue that arises though of course is 

important. I am a doctor that works in a public hospital for the uninsured, and they always point out that when more people are put 

on Medicaid, my lines get longer because the Medicaid dollar is 

spread more thinly. And California is kind of like a case study in 

this right now. Just for everybody—you and I know this—but they 

receive $2 billion a year for the next 5 years to expand Medicaid 

coverage. Now they are paying but since then their deficit has 

caused them to now decrease payments to physicians—Mr. Engel 

spoke about dentists—to $12 a visit that providers have filed lawsuits to stop this but your administration, your office has filed a 

friend of the court on behalf of California while acknowledging that 

low reimbursement does affect access. So I have always been struck 

that we have the form of insurance without the power of it. Can 

you respond how if California is paying a dentist 12 bucks to see 

somebody, we don’t really have access, how do we defend that, 

number one, and number two, how will that improve under the 

ACA? 

Ms. SEBELIUS. Well, I think the reference that Mr. Gingrey made 

to the increase for Medicaid providers to Medicare rates is part of 

the strategy. We understand that—— 

Mr. CASSIDY. Now, of course, it doesn’t affect dental because dental is not a Medicare-covered benefit, and so dental I presume will 

stay at 12 bucks. 

Ms. SEBELIUS. Oh, I am sorry. Yes. 

Mr. CASSIDY. This is heterogeneous. It doesn’t cover specialists, 

for example. It won’t cover many other entities. It is just primary 

care in particular. 

Ms. SEBELIUS. Well, it covers primary care. 

Mr. CASSIDY. And that is for 2 years, correct, and then it reverts 

back to—— 

Ms. SEBELIUS. It is built in for 2 years in terms of the overall 

budget but there is no question, I think, that the concerns about 

provider rates and Medicaid are ones that we share. As you know, 

the court case was—— 

Mr. CASSIDY. I know we share that, but how can the ACA make 

it better if it is, one, increasing cost as an absolute dollar? California is already going bankrupt, which is acknowledged by the administration. And yet somehow as we increase absolute cost and 

put more people on we are going to somehow improve rates. I don’t 

follow that. 

41 

Ms. SEBELIUS. Well, I would say a lot of those folks right now 

are entering the health care system at various points with no reimbursement strategy whatsoever. So Medicaid rates may be too low 

in many instances but I would suggest that it is better than no rate 

at all, which is being absorbed in some way in those same budgets 

that you are talking about. 

Mr. CASSIDY. Twelve dollars a doctor’s visit is not. Fair statement? I mean, $12 is way below the threshold for somebody covering their cost and so, again, it seems as if the ACA is providing 

the form of insurance without the power of it. 

Ms. SEBELIUS. Again, this is, as you know, a State-Federal partnership. Decisions about provider rates are made at the State 

basis. We are trying to work with States to make sure that they 

don’t deny access to beneficiaries based on slashing provider rates. 

Mr. CASSIDY. It seems inevitable with the policies, but I am out 

of time. I yield back. 

Mr. PITTS. The Chair thanks the gentleman and recognizes the 

gentleman from Kentucky, Mr. Guthrie, for 5 minutes for questions. 

Mr. GUTHRIE. Thank you very much. Thanks for coming this 

morning. 

I kind of want to touch on what my colleague from Kentucky, 

Congressman Whitfield, was talking about on the grants, the community transformation grants, and there is evidence they are being 

used to advocate or lobby pending positions, and I would agree that 

if you look at the language in the budget, you are striking the language that was put in the Appropriations Act but you do leave ‘‘no 

part of any appropriation contained in this act shall be used to pay 

the salary, expenses of Federal, State’’ but you do leave in for local. 

So it seems that the proposal would grant access to the local because it says in the law that no money shall be enacted by Congress without express authority by Congress. So it appears the way 

I read this that you are asking for authority to do local. But anyway, but the current law, the way I read it, now, that is going forward, obviously it is not enacted because it is a proposed budget. 

But the grants were put out under the existing laws, as you said, 

and I think you said it applied to you but not the grantee at the 

end of his comment. 

Ms. SEBELIUS. Pardon me? 

Mr. GUTHRIE. You said that the language applied to us, I guess 

meaning the government, but not the grantee. I am not sure exactly what you meant by that. That is what I was going to ask you 

on that. 

Ms. SEBELIUS. The original language that has been part of the 

law that we have administered and had our grantees administer 

applied to grantees lobbying the Federal government. That has 

been prohibited. That is part of the underlying law. What was 

added to our appropriation bill in 2012 and what I was trying to 

explain is that no new prevention grants have been issued under 

this new language and we are retraining grantees is that a prohibition for grantees to lobby at the local level or the State level is now 

an additional piece of the law that was not part of the underlying 

statute. So that is new. We will administer the directives to grantees to comply with that. There have been no funds that have been 

42 

issued under the new law, and I think the pages of examples which 

began to be recited were grantees who are lobbying at either the 

State or local level, not lobbying the Federal Government. 

Mr. GUTHRIE. OK. Well, it says in the current law that you cannot use the grant money intended to design or influence in an any 

manner a Member of Congress or jurisdiction or an official of any 

government to favor, adopt or oppose or vote otherwise any legislation or ratification, policy or appropriation. So I don’t think it just 

limits—current law doesn’t limit you to Congress. It is any lobbying. And U.S. Code 1913. So the point is, that is the way I read 

it. It says a Member of Congress or jurisdiction or any official of 

any government or an official of any government to favor or oppose, 

vote or otherwise, and maybe that is the misunderstanding because 

in the Recovery Act on the Web site in the Recovery Act, Connecticut said a grassroots coordinator spent 163 hours establishing 

community support by educating, advocating adoption of smokefree policies. There is several. In Idaho, to address obesity through 

nutrition, and it says working for proposals in the 2012 State legislature for vending machines for schools. And I can give these to 

you. And then in the grants, so that was Recovery Act money. Now 

it has gone to community transformation grants and the department that has been approved actually in their grant proposal says 

they want to pass at least 70 regional local institutional policies 

to—and the New York public fund says they want a tax on lobby 

for local—they say advocate but lobby for a tax on sugar-sweetened 

beverages. 

Having said that, my reading of the law is that is a ban on any 

form of government. Does the department think it is only Federal 

Government? 

Ms. SEBELIUS. Again, Congressman, I apologize. I do not have 

the existing statute here. I would love to answer this question in 

writing. I can tell you fiscal year 2012 appropriations through Congress that we just have added new language. 

Mr. GUTHRIE. Right. 

Ms. SEBELIUS. The new language, which was not part of the underlying law, applied to grantees lobbying at the local level. So—— 

Mr. GUTHRIE. Except you have a grant based on—— 

Ms. SEBELIUS. The underlying law clearly didn’t cover some of 

what is covered in the new language. 

Mr. GUTHRIE. Well, that may be where we are—I am agreeing 

with you that the money that—you haven’t seen grants out with 

the appropriation language in section 503 but I think the existing 

law—and maybe that is where we—because it says to me—and I 

know you didn’t have a chance to read it, and I agree with you, you 

need the time to read it, but it says any Member of Congress, a 

jurisdiction or an official of any government, so I think that would 

be city governments, State governments. And if you all don’t think 

that is the case, I would like to have that in writing what your position is. 

Ms. SEBELIUS. I would be glad to do that. 

Mr. GUTHRIE. I appreciate that. Thank you. 

Mr. PITTS. The Chair thanks the gentleman and recognizes the 

gentlelady from Tennessee, Ms. Blackburn, for 5 minutes for questions. 

43 

Mrs. BLACKBURN. Thank you, Mr. Chairman. 

Madam Secretary, thank you for staying with us to take these 

questions. I want to ask you about Section 220. And we had Section 

220. The President supposedly—— 

Ms. SEBELIUS. Section 220 of—— 

Mrs. BLACKBURN. Of the Obamacare bill, you know. 

Ms. SEBELIUS. The Affordable Care Act? Is that—— 

Mrs. BLACKBURN. Yes, ma’am. The President goes back to 2009 

saying we are going to have transparency, we are going to have 

open government, and this was a major push. Fiscal year 2012 appropriations bill that the President signed included Section 220. 

This was an important thing. We are going to have transparency, 

going to let you know where the money gets spent on this bill. Yet 

we get the 2013 budget and Section 220 has been removed in its 

entirety. 

So we have a lot of concerns about what is happening with the 

transparency components and how the money is going to be spent. 

So I would encourage you to look at this and see if you can find 

out what has happened with the money that was going to be designated to transparency. We would like to have an answer to that 

one if you do not mind. 

Ms. SEBELIUS. I would be glad to do that. 

Mrs. BLACKBURN. Thank you. I appreciate that. 

In light of that, in trying to keep track of where the money is 

going with this bill, you and I have talked about TennCare and the 

lessons that should have been learned from TennCare as the test 

case for public option health care. One of those we repeatedly or 

I repeatedly discussed, and I know you didn’t think TennCare was 

a traditional public option program, not sure what we think was 

a traditional public option, but nonetheless, your estimates for the 

Obamacare bill were to be a trillion dollars in spending, and now 

I am looking at the figures for 2014 through 2023 as being a $2 

trillion estimate. So you are already running ahead of estimates. 

Forbes is looking at these programs, these grant programs being 

about 30 percent over budget. Forbes had an article out on that. 

So I just want—you know, our problem with TennCare, Madam 

Secretary, was that within 5 years it had quadrupled in its cost 

over the original estimates. So how do you see this playing out and 

what accommodations are you and your team making for this program doubling and then possibly quadrupling in its anticipated 

cost? 

Ms. SEBELIUS. Well, Congresswoman, I would be happy to try 

and get you an answer. I don’t know what you are quoting. I don’t 

know what it is based on. So I would be delighted to get you a specific answer. We don’t think the program will double or quadruple 

in cost. We tried to give as accurate an estimate as we could at 

every point all the way. 

Mrs. BLACKBURN. Let me ask you—— 

Ms. SEBELIUS. Two years in, we are underspending a lot of the 

estimates—— 

Mrs. BLACKBURN. OK. Let me ask you this. As we worked on this 

legislation, I asked repeatedly if you had any example where 

spending these near-term, ramping up all these near-term expenses had resulted in long-term savings. To my knowledge, you 

44 

had no example of any program that showed where ramping up 

these near-term expenses would yield a long-term savings. Were 

you all ever able to find an example? Because you are running over 

budget. You have got a budget that has increased 25 percent since 

2008. Your estimates are running ahead of what they have been, 

and we are at record spending, record deficits, record debt in this 

country. So if you ever came up with that example, I sure would 

like to see it, and I have got some constituents that would certainly 

like to see it. 

Let me shift gears for just a moment. I want to your narrow religious exemption rule and what I think is a fee-for-faith principle 

that is out there. USA Today had an op-ed, an editorial, and they 

made the comment that not only had you crossed the line on religious liberty but you had galloped over it. I just have to ask you, 

Madam Secretary, did you all consult the Department of Justice before you made this decision? 

Ms. SEBELIUS. Which decision are you referring to, Congresswoman? 

Mrs. BLACKBURN. Religious liberty, the First Amendment. 

Ms. SEBELIUS. Which decision are you referring to? 

Mrs. BLACKBURN. The mandate to the Catholic churches. I think 

you know what I am talking about. 

Ms. SEBELIUS. We have consulted with a number of people. Did 

we consult before we finalized the rule on prevention with the Department of Justice? 

Mrs. BLACKBURN. Yes, ma’am. 

Ms. SEBELIUS. No, we did not. 

Mrs. BLACKBURN. You did not? OK. 

Thank you. My time is expired. I yield back. 

Mr. PITTS. The Chair thanks the gentlelady. 

The Chair recognizes the gentleman from Pennsylvania, Dr. 

Murphy, for 5 minutes for questions. 

Mr. MURPHY. Thank you, Madam Secretary. I want to follow up 

on the religious freedom First Amendment issue as well. I just 

want to be sure. If an employer is saying that he or she cannot find 

it in their conscience in terms of practicing their religion that they 

cannot pay for a plan or have a plan that allows for or requires 

provision of abortifacient drugs and they therefore do not provide 

that plan, just clarify for me, do they pay the $2,000 tax for not 

having it or do they pay the $3,000 tax for having a plan that is 

in violation? 

Ms. SEBELIUS. There is no penalty attached to the provision of 

preventive care. There certainly are penalties for employers who 

don’t comply with the law. There also is no abortifacient drug that 

is part of the FDA-approved contraception. What the rule for preventive care—— 

Mr. MURPHY. Ma’am, that is not true. 

Ms. SEBELIUS. Well, the scientists—— 

Mr. MURPHY. Isn’t the morning-after pill or something like that 

an abortifacient drug? 

Ms. SEBELIUS. It is a contraceptive drug, not an abortifacient. 

Mr. MURPHY. Yes or no, does it—— 

45 

Ms. SEBELIUS. It is not an abortifacient. It does not interfere 

with a pregnancy. If the morning-after pill were taken and a female were pregnant, the pregnancy is not interrupted. 

Mr. MURPHY. Ma’am, I appreciate that is your interpretation. 

Ms. SEBELIUS. That is what the scientists and doctors inform me, 

and—— 

Mr. MURPHY. We are not talking about scientists, we are talking 

about religious belief. 

Ms. SEBELIUS. I am telling you that—— 

Mr. MURPHY. Ma’am, I am asking about a religious belief. 

Ms. SEBELIUS [continuing]. The definition of an abortifacient—— 

Mr. MURPHY. In a religious belief, that is a violation of a religious belief based upon those within a religion. 

Now, let me expand on that then. So if an employer says I cannot 

have this plan provided for by the employer whether it is paid for 

directly or someone says it is going to be paid for by somebody else, 

do they end up paying the $2,000 tax or the $3,000 tax per employee? 

Ms. SEBELIUS. The rule which we intend to promulgate in the 

near future around implementation will require insurance companies, not a religious employer but an insurance company to provide 

coverage for contraceptives for employees who choose to access 

that—— 

Mr. MURPHY. Ma’am, that is not what I am asking about. Ma’am, 

I am not asking about that. This is very important. This is a First 

Amendment issue. You keep talking about these things in a different way. 

Let me try and help make this clear, because one of the things 

I think you say is that if an organization has people within that 

organization that are not part of that same faith value system, that 

they therefore couldn’t claim an exemption. Am I correct in that? 

So let us say Catholic Charities has other employees who are not 

Catholic or a Jewish hospital may have other doctors who are not 

Jewish or Catholic Charities may provide services to non-Catholics 

that they therefore could not claim a religious exemption. Is that 

accurate? 

Ms. SEBELIUS. They don’t fall under the definition that is total 

exemption from the rule. They will fall under the secondary rule 

of a religious objection to the service and—— 

Mr. MURPHY. But under that, they would still have to provide 

the objectionable medical services. 

Ms. SEBELIUS. Absolutely not. The religious employer who objects 

to contraception because of religious beliefs will not provide, will 

not pay for, will not refer employees to an objectionable service. On 

the other hand, the insurance company will—— 

Mr. MURPHY. Ma’am—— 

Ms. SEBELIUS [continuing]. Provide the service to employees—— 

Mr. MURPHY [continuing]. Let me make sure I understand this 

correctly. So if a child in school—— 

Ms. SEBELIUS [continuing]. Upholds religious liberty and it 

makes sure that it doesn’t—— 

Mr. MURPHY. Ma’am, no it doesn’t. Ma’am—— 

Ms. SEBELIUS [continuing]. Access to benefits. 

46 

Mr. MURPHY. Ma’am, no, you are wrong. You are wrong for this 

reason. You know, you are setting up a rule that not even Jesus 

and his apostles could adhere to. Jesus was Jewish. He recruited 

Jewish people—tax collectors, sinners, Mary Magdalene and others—and therefore saying you know what, because you are not 

bringing all Christians into this fold you can’t do this. What you 

are missing here is because someone else is paying for it, somehow 

that makes sense. If I go to a tire store, which I recently did, it 

was buy three, one free tires, I know I am paying for that extra 

tire by the other three being pumped up or someone else is paying 

for it by their costs going up somewhere else. It is one thing—I 

have searched for ways of trying to help you understand it, and I 

don’t know, maybe the administration just refuses to understand so 

therefore can’t happen. Whether or not you have someone else pay 

for it or whether something else is under the guise of being free, 

as long as it is imposed upon someone to have this available, that 

it is still a violation of their faith, which gets into the First Amendment. I don’t understand why this isn’t clear. 

Ms. SEBELIUS. Well, first of all, I think the tire analogy is not 

quite accurate. Insurance is—— 

Mr. MURPHY. Well, who is going to pay for it? 

Ms. SEBELIUS [continuing]. About a balance of risk—— 

Mr. MURPHY. Who is going to pay for the—— 

Ms. SEBELIUS [continuing]. We know because it was done in the 

Federal employees—— 

Mr. MURPHY. Who pays for it? There is no such thing as a free 

service. 

Ms. SEBELIUS. The reduction in a number of pregnancies compensates for the cost of contraception. The overall plan—— 

Mr. MURPHY. So by not having babies born, we are saving 

money? I just want to get this on the record, Mr. Chairman. So you 

are saying by not having babies born, we are going to save money 

on health care? 

Ms. SEBELIUS. Providing contraception as a critical preventive 

health benefit for women and for their children reduces—— 

Mr. MURPHY. Not having babies born is a critical benefit. This 

is absolutely amazing to me. I yield back. 

Ms. SEBELIUS. Family planning is a critical health benefit for—— 

Mr. MURPHY. You said avoiding pregnancy—— 

Ms. SEBELIUS [continuing]. Women in this country according to 

the Institute of Medicine, and that is again—— 

Mr. MURPHY. I think that is—— 

Mr. PITTS. The gentleman’s time is expired. 

The Chair recognizes the gentleman from New Jersey, Mr. 

Lance, for 5 minutes for questions. 

Mr. LANCE. Thank you very much, Mr. Chairman. 

Madam Secretary, the President’s budget requests the level of exclusivity for follow-on biologics, reducing it from 12 years to 7 

years, and I think that that might be counterproductive and I am 

wondering whether you would be willing to reexamine that. On a 

bipartisan basis, this committee has repeatedly indicated that it favors the 12-year period. There was a bipartisan vote of 47 to 11 on 

that issue in this committee. 

47 

Ms. SEBELIUS. Well, I think, Mr. Lance, this is an important and 

ongoing dialog. The balance of making sure we protect research 

and development, making sure that companies can in fact make a 

profit when they find a successful strategy, and opportunities for 

patients to have an affordable adoption that may be lifesaving is, 

I think, what is at risk here, and certainly I think there is a difference of opinion of whether 12 years is the appropriate time, 

whether 7 years adequately compensates companies and yet makes 

more cost-affordable options available. 

Mr. LANCE. Thank you. I would encourage you to work with us 

on that. 

Ms. SEBELIUS. I would be glad to. 

Mr. LANCE. I favor 12 years, and I appreciate any work we might 

be able to do together on that. 

We are hearing from those who have to implement the new summary of benefits and coverage requirements that the time period 

may be difficult to meet. Given the fact that employers and plans 

need to get this done and if they don’t comply there are significant 

financial penalties, might the Department consider any sort of 

delay of the non-enforcement period? 

Ms. SEBELIUS. Well, I think, again, the essential health benefits 

are a critical component. We put out very detailed guidance because we were hearing from a lot of States, from insurers and others saying tell us what is going on. I think the strategy of suggesting that a benchmark plan already marketed and in place in 

a State is a really accelerated strategy. This is not something that 

has to be started from the ground up. This is an ability at a State 

level to choose a plan, the most popular small employer plan, the 

Federal health benefit plan, a state health benefits plan that is in 

place, is marketed, is priced at the State level. We made it very 

clear in the guidance that this is what we intend to propose. We 

are trying to get as much feedback as possible from insurers, from 

States. We have had a very robust discussion and in the very near 

future will be issuing the interim rule. 

Mr. LANCE. Thank you. Regarding the Supreme Court argument 

on the health care legislation, undoubtedly the Solicitor General’s 

Office will be arguing that case. Does your department also have 

lawyers who will be involved in the oral argument or is it exclusively the Solicitor General? 

Ms. SEBELIUS. It is the Solicitor General who will be involved in 

the oral argument. 

Mr. LANCE. Thank you. I am willing to yield back to any member 

who is interested in further questions. Thank you, Madam Secretary. 

I yield to Dr. Burgess. 

Mr. BURGESS. Thank you. It is very kind of you to provide a little 

additional time. 

Madam Secretary, you were here before and we talked a little bit 

about the difference between a voucher and premium support, and 

you had some difficulty articulating a difference between the two. 

I am going to try to help you, because of course under the exchanges, you will provide a subsidy, but that subsidy is not coming 

in the form of a check or cash to a household. There will presumably be some sort of acknowledgement that this help is now availVerDate Aug 31 2005 11:16 Jun 18, 2013 Jkt 037690 PO 00000 Frm 00051 Fmt 6633 Sfmt 6633 F:\112-12~2\112-12~1 WAYNE
48 

able to you to help you purchase your insurance in the exchange 

so that might be regarded as a voucher, a coupon that you could 

take to the exchange and in return you get a discounted price for 

your health insurance. 

Now, premium support, I don’t know, you might have your insurance through the Federal Employee Health Benefits Plan. Many 

people in the administration do. That is premium support where 

the FEHBP goes out and takes requests for proposals from all 

these different insurance companies. There is in fact a bill, H.R. 

360. Members of Congress are going to be required to buy their insurance in the exchange after 2014. Members of the administration, members of the Federal agencies are exempted from that requirement. You in fact could experience the world of a voucher 

versus premium support by supporting H.R. 360, which would 

move all members of leadership, leadership staff and the administration and the agencies from the FEHBP into the exchanges. 

Would that be a good idea? 

Ms. SEBELIUS. We would be happy to look at it. 

Mr. BURGESS. I would appreciate your response. 

Mr. PITTS. The Chair thanks the gentleman. 

That concludes the first round of questioning. We will now go to 

Dr. Christensen, who is a member of the full committee, who has 

sat patiently since the beginning of the hearing, for 5 minutes for 

questions. 

Mrs. CHRISTENSEN. Thank you, Mr. Chairman and Ranking 

Member, I really appreciate the opportunity to sit on this hearing 

and your generosity in allowing me to participate. 

Welcome, Madam Secretary. 

Ms. SEBELIUS. Thank you. 

Mrs. CHRISTENSEN. Your being here gives me an opportunity to 

formally and publicly thank for you the unprecedented efforts that 

the Department has taken under your leadership to end inequalities in health care and health status through your national strategy to end health disparities. 

On the other hand, I wanted to say briefly that the 2013 budget 

does raise some concerns about our ability to meet the goals that 

you have set out, but I also know that across the budget, President 

Obama has worked with agencies wherever there are cuts to take 

steps to ensure that important programmatic activities are not 

really cut as might appear, that they don’t suffer but are covered 

in other ways, and 5 minutes doesn’t give me the opportunity to 

go through those areas of concern, but would you be willing to meet 

with the Tri-Caucus to go over some of those areas and show us 

perhaps where steps have been taken to make sure that those programmatic activities have not been cut? 

Ms. SEBELIUS. I would be pleased to do that. As you know, we 

have tried to work carefully with Members of Congress who share 

our concern about the health disparities issues present around the 

country, and we have lots of strategies, and agencies hard at work 

closing those gaps, and for the first time ever have a national strategy on health disparities that is a real action plan. So we would 

be delighted to go over that with you and meet with you about it. 

Mrs. CHRISTENSEN. Thank you. And the President’s budget proposes a single blended Federal matching Medicaid rate. I am sure 

49 

there are different opinions about that, but I think that the time 

has come for the territories to have the same methodology used for 

setting our match, and we did have that included in the House 

version of the Affordable Care Act, and the Senate actually agreed 

to it but we weren’t able to get it done because of just technical 

reasons and how both bills were structured. If given the authority, 

would you be supportive of setting the match according to the way 

the States are done on the average income? Right now we are a 50/ 

50 match in statute, and that is very difficult. Would you be supportive of having the authority to set our match as the States are 

set? 

Ms. SEBELIUS. Well, we would certainly be happy to work with 

you. I know it is a huge issue for the territories and the islands 

and we are working on that. The framework does not allow us to 

do that, and we do not have the budget to do that currently. So we 

would be happy to pursue that discussion. 

Mrs. CHRISTENSEN. And if we went into the blended rate, if that 

does take place, it is my understanding you need about 2 years of 

history to be able to make the determination, so it would be helpful—we wouldn’t mind going into the blended rate if that takes— 

if that is the way we are going to go. 

Just one more question. There are two new institutes at the 

NIH. One is the one you mentioned on translational medicine and 

the other one is the National Institute for Minority and Health Disparity Research, one created administratively, the latter one, and 

the Minority and Health Disparity Institute by the Affordable Care 

Act. The budget for the National Institute for Minority and Health 

Disparities is one of the lowest of all of the institutes, and that is 

despite the major initiatives that we have to eliminate health disparities. Is there language in the budget or would you accept language to bring the National Institute of Minority and Health Disparity Research on par with the other institutes? And I do know 

that the Research Centers of Minority Institutions would—that 

program was transferred to the institute and even funding with it, 

but even that funding was insufficient to support the research centers so it remains under underfunded under the institute. So is 

there language that would bring the National Institute on Minority 

and Health Disparity Research on par with the others or would you 

be willing to accept that language? 

Ms. SEBELIUS. Well, again, Congresswoman, I think you have 

identified that the transfer along with staff and budget actually 

has significantly enhanced this whole effort over where we were 2 

years ago. We would be happy to work with you around ideas and 

strategies for continuing improvement, but there has been kind of 

a big move forward I would say from where we were when we 

began this conversation. 

Mrs. CHRISTENSEN. OK, but my understanding it is still underfunded even with moving the RCMI in, so we appreciate your willingness to work with us, Madam Secretary, and thank you for your 

testimony and your answers. 

Ms. SEBELIUS. Thank you. 

Mr. PITTS. The Chair thanks the gentlelady. 

Madam Secretary, we have one follow-up on each side, if you can 

stay for that. 

50 

Mr. PALLONE. And Mr. Markey too. 

Mr. PITTS. And Mr. Markey has come in and would like to ask 

questions. The gentleman, Mr. Markey, is recognized for 5 minutes 

for questions. 

Mr. MARKEY. Thank you, Mr. Chairman, very much. 

This is my 36th year on the committee, on the health care committee, so it has been a long time trying to get to this point where 

we actually have a plan to deal with the long-term health care 

problems of our country, and amongst those includes the National 

Alzheimer’s Project Act to deal with this very important issue that 

costs the Federal Government—Medicare and Medicaid last year 

spent $130 billion on Alzheimer’s patients in America. Unbelievable amount of money, and that is with only 5 million Americans 

having it. By the time all the Baby Boomers have retired, the cost 

is going up to maybe $600 billion a year just on Alzheimer’s patients if we don’t find a cure for it, and it is obviously a budgetary 

crisis that is looming. 

And last week, Madam Secretary, we thank you, you issued your 

draft national plan pursuant to the National Alzheimer’s Project 

Act, which I am the principal House author of along with Congressman Smith, and I think it is great. One thing I wanted to talk 

about here today is that at NIH there is $6 billion a year spent on 

cancer research and there is $3 billion a year spent on AIDS research but only $489 on Alzheimer’s, even though 15 million Baby 

Boomers are going to have it. We have to find a cure. 

And so Madam Secretary, I congratulate you and the administration on announcing the addition of $80 million more in this coming 

year’s budget on the research for Alzheimer’s. I think that that is 

absolutely critical, and I congratulate you on that and I just think 

it has to be dramatically higher, and if there is one thing we should 

just single out and just say this has to be spared, it is the NIH 

budget, that just has to go up and up and up because the National 

Institutes of Health are really the National Institutes of Hope, and 

in Alzheimer’s, there is really going to be a medical catastrophe 

that hits this country when all the diseases that we have been successful in helping to cure lead to people living so long that half our 

population winds up in retirement with Alzheimer’s. It is going to 

be an absolute disaster and it is going to cost us a fortune. 

And the second thing, Madam Secretary, is in the Affordable 

Care Act, I was able to include language for an Independence at 

Home pilot project, and there are now more than three times as 

many applicants, that is, medical institutions, that are applying for 

those slots in order to conduct this experiment. I would just like 

to draw to your attention the fact that the VA has already had a 

wildly successful program that has 10,000, 11,000 people in it that 

reduced hospital stays by 60 percent and nursing care days by 80 

percent, and so I appreciate all of your efforts in this area but I 

think it could help us to telescope the time frame that is going to 

take us in order to put together a program to keep people at home, 

share it with the institutions that are working hard in partnership 

to keep them at home, making the patients and their families better able to deal with the disease. 

51 

So I was just looking for a little wisdom from you in terms of 

what your agency is doing and how much of an imperative you see 

this for our country. 

Ms. SEBELIUS. Well, first of all, Mr. Markey, I want to thank you 

for your tenacious leadership on the Alzheimer’s issue and continuing to raise it and make sure it is an issue that is focused on. 

As you know, not only is there 80 million new research dollars in 

the 2013 budget, there were also reallocated another $50 million in 

the 2012 budget at NIH. So it is about a 25 percent increase in Alzheimer’s research. We also have proposed a portion of those funds, 

additional funds, not those funds, for care giving and at-home care 

because we know family care providers are the largest number of 

providers for family members. 

But I would share your interest, and we look forward to working 

with you on what is the long-term strategy, how fast we can get 

there. As you know, some timetables were set for the first time in 

the National Alzheimer’s Plan. There is a lot of agreement that we 

probably need to move ahead of that pace but at least we have a 

pace and a measurable pace outlined and so we would look forward 

to working on getting the resources, getting the research, getting 

the care-giving strategies in place. 

Mr. MARKEY. A fully implemented Independence at Home project 

could save billions of dollars a year if we could just get to the point 

where we verify what the VA has already determined. 

Ms. SEBELIUS. Well, that is a great point, and we will definitely 

work with our partners at the VA. 

Mr. PITTS. The Chair thanks the gentleman. 

Mr. MARKEY. Thank you for your great work. I appreciate it. 

Mr. PITTS. The Chair thanks the gentleman and recognizes Dr. 

Burgess for one follow-up for 5 minutes. 

Mr. BURGESS. Thank you, Mr. Chairman. 

I will just point out to Mr. Markey while he is still here, this is 

one of the rare instances of bipartisanship in the Affordable Care 

Act where we worked with your office on getting the Independence 

at Home language refined and included, so perhaps there is hope 

down the road. 

But actually, going back to State exchanges for a moment, some 

States are concerned that without the final rules on the exchanges, 

they are bumping up against a deadline that is going to be pretty 

tough for them to meet. I mean, they need these rules probably 

within the next couple of months if they are to be able to finalize 

their issues to meet the deadlines. 

Ms. SEBELIUS. And they will have them shortly. We have the interim final rule out and we intend to finalize the rule in the very 

near future. 

Mr. BURGESS. So we can look for that by, what, the Ides of 

March? April Fools Day? Tax Day? What day can we—— 

Ms. SEBELIUS. Shortly. 

Mr. BURGESS. Shortly? OK. 

Ms. SEBELIUS. So if they need them in the next couple of months, 

they will definitely have them in the next couple of months. 

Mr. BURGESS. And then the essential health benefits rule also 

will be coming out in that same very short time span? 

52 

Ms. SEBELIUS. The essential health benefits rule has not yet been 

proposed as an interim rule. I am talking about finalizing the exchange rule. That will happen in the very near future. They will 

have the exchange rule. They will have the Medicaid expansion 

rule. That has been out as interim final rule. The essential health 

benefits rule will be promulgated in the near future but there is 

detailed guidance right now that States are working on. 

Mr. BURGESS. I will just make a prediction: that won’t happen 

until after Election Day in November, but that is just me being 

cynical. 

For a State like—let us say, for example, there is a State out 

there that worries about what is happening under the Affordable 

Care Act and really thinks the Federal Government is maybe going 

a little too far on this so they are reticent to set up a State exchange. I mean, I can think of a State that might fall into that category. I may be going there this afternoon. So you are preparing 

a national exchange for those States that will not either because 

they haven’t had time or because they did not have the inclination 

will not have an operational State exchange? 

Ms. SEBELIUS. There will be a Federal facilitated exchange in 

some cases operating fully the exchange for States and others in 

partnership. 

Mr. BURGESS. But the Federal Government will step in and provide that operational control. Is that correct? 

Ms. SEBELIUS. Pardon me? 

Mr. BURGESS. The Federal Government will step in and provide 

that? 

Ms. SEBELIUS. Yes, sir. 

Mr. BURGESS. Now, will that be administered through your office 

or through the Office of Personnel Management? 

Ms. SEBELIUS. It will be administered through the CMS, 

through—we will be operating at HHS the federally funded exchange. 

Mr. BURGESS. My understanding is, there will be both a for-profit 

and a non-for-profit offered under the language of the law. Is that 

correct? Will there be a not-for-profit Federal exchange? 

Ms. SEBELIUS. No, there will not. 

Mr. BURGESS. I thought the language of the law said there had 

to be a for-profit—— 

Ms. SEBELIUS. No, I think you are talking about the co-op situation. 

Mr. BURGESS. No, I am talking about the exchanges, or the Federal exchange for public option, whatever we want to call it. 

Ms. SEBELIUS. No, there will not be a not-for-profit. States have 

that option. That is not at the Federal level, sir. 

Mr. BURGESS. Let me ask you this. A lot of talk about the contraception issue and the essential benefits. When will we see—are you 

proposing that an institution that refuses to comply with your contraceptive mandate, what is going to happen to them? 

Ms. SEBELIUS. Sir, I am hopeful that the rule that we intend to 

promulgate in the very near future, which will be informed by conversations with not only religious employers but labor leaders, 

women’s groups and others and actually greatly informed by the 28 

States which have a framework like we are talking about already 

53 

in place will indeed satisfy the religious liberty issues and make 

sure these preventive health benefits are provided. 

Mr. BURGESS. Are the noncompliers going to be fined? 

Ms. SEBELIUS. Sir, we will get—as you know, this is a situation 

where—— 

Mr. BURGESS. Well, let me just share with you something. It 

bothers me that for the first time in this country, regardless of 

what the issue is, and I personally support the issue of contraception but at the same time it bothers me that there might be a fine 

for faith. I don’t think that has ever happened before in this country, and I am concerned about the direction—— 

Ms. SEBELIUS. No one will be fined for faith. This is an issue 

dealing with insurers—— 

Mr. BURGESS. Well, why did you propose a two-tier system where 

some churches might be exempt but a Catholic hospital might not? 

I mean, that sounds like that the direction you are going. 

Ms. SEBELIUS. The exemption, which is in the original rule finalized in January—I am sorry—in February is the language used in 

the majority of State laws which have some religious exemption. 

That is where we got that language. It is a definition that is in the 

IRS code. It is not something that we invented. It is a definition 

of churches and church-affiliated associations. 

Mr. BURGESS. If a State required sterilization as a condition of 

citizenship, would you be prepared to do that at the Federal level? 

Ms. SEBELIUS. Sir, I am not going to answer that question. 

Mr. BURGESS. Thank you, Mr. Chairman. 

Before we finish up, can I have unanimous consent? Mr. 

Whitfield had a number of observations that he wanted entered 

into the record, and I would ask to enter those now under unanimous consent. 

Mr. PALLONE. Mr. Chairman, reserving the right to object. I 

know you handed that to us but we haven’t had time to really look 

at it, so if we could take a look at it before we agree to unanimous 

consent? 

Mr. PITTS. All right. We will wait until you take a look at that, 

and recognize the Ranking Member, Mr. Pallone, for 5 minutes for 

questions in follow-up. 

Mr. PALLONE. Thank you. 

Madam Secretary, I just wanted to give you an opportunity to 

address somewhat of a follow-up to Dr. Burgess and others have 

said. Clearly the matter of insurance coverage for FDA-approved 

contraceptives under the ACA has become controversial. Unfortunately, what I think has been lost in the debate is an understanding of how HHS arrived at the decision it has made, and I 

would just ask you to take a few moments—you know, I have got 

4 minutes or so—to provide the broader picture, to tell us about the 

ACA’s provisions on preventive health services and women’s preventive health services, the role of the Institute of Medicine study 

on coverage of women’s preventive health services and the HHS’s 

process in developing these regulations that are now under attack. 

I know you started to get into that with Dr. Burgess but take the 

4 minutes to maybe explain it a little more. 

Ms. SEBELIUS. Well, Mr. Pallone, the Affordable Care Act had a 

provision that as part of a definition of essential health benefits 

54 

various populations should be looked at. The recommended strategies for children around immunizations would be included. The 

strategies for preventive health that are recommended by the 

United States Preventive Health Services Task Force would be included. And recognizing that too many insurance plans often did 

not include benefits that were specifically recommended for women’s health, we were asked to develop a set of preventive health 

services for women. We turned to the independent scientifically 

driven Institute of Medicine and asked them to make recommendations to us. They came back with eight various health benefits— 

domestic violence screening, mental health benefits, well woman 

visits and the full range of scientifically recommended contraception services. 

We promulgated their rules as part of the strategy for women’s 

health as an interim rule and added a religious exemption, and to 

be informed by what language should be used in that religious exemption, we looked at the 28 States which have some kind of contraceptive mandate in place right now often for a decade or more 

operationally right now and we included language that was used 

by the States in the majority of cases that have an exemption. 

Many States don’t have an exemption at all. That language was 

put out. It was finalized in February and an additional accommodation was made. We announced that we would have an additional 

year for religious-based organizations who had a religious objection 

to the provision of contraceptives so that their implementation date 

would be deferred until August of 2013, and that we would promulgate additional rules around their ability to both uphold their religious freedoms, not refer, not pay for, not provide contraceptive 

coverage and yet make sure that women who were janitors, teachers, nurses, employees, the spouses of employees, the daughters of 

employees would have access to this very critical health benefit. 

And so we will be promulgating a rule around the implementation strategy for preventive health services, which will be a huge 

step forward for American women, knowing that contraception is 

the most frequently taken prescription drug for women 14 to 44. 

Ninety-nine percent of women of all religions use contraceptives at 

some point in their health lives and that often if you purchase contraception out of your own pocket, it can be an expensive strategy. 

If it is provided within an insurance pool, it not only is no cost but 

often reduces the cost of the pool. 

Mr. PALLONE. Thank you very much. I appreciate it. 

Thank you, Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentleman. 

I think that concludes all of our questioning. Thank you, Secretary Sebelius, for again taking time to be with us today and for 

all of your answers. 

I ask unanimous consent that all members’ opening statements 

be made part of the record. Without objection, so ordered. 

I remind the members that they have 10 business days to submit 

questions for the record, and I ask the Secretary to respond to the 

questions promptly. Members should submit their questions by the 

close of business on Thursday, March 15th. 

Without objection, the subcommittee is adjourned. 

[Whereupon, at 12:40 p.m., the subcommittee was adjourned.] 

55 

[Material submitted for inclusion in the record follows:] 

56 


77557.012

Rep. Henry A. Waxman 

Ranking Member 

Committee on Energy and Commerce 

Subcommittee on Health Hearing on "FY 2012 HHS Budget" 

March \, 2012 

Welcome to you Secretary. It has been a full year since we have had the pleasure of your 

company. and you have been busy in that year. 

I would like to take this opportunity to compliment you on the great work that is underway on 

thc Affordable Care Act. Here are some of the early accomplishments: 

More than 2.5 million young adults under the age 01'26 now have health 

insurance through their parents plan. 

More than 85 million people. including those in Medicare and private health 

insurance plans. have access to free preventive coverage. 

More than 30 states have begun planning health exchanges - helping make good 

on the promise of affordable coverage for all. 

More of your prcmium dollars are going to health benefits. not corporate profits 

helping consumers get more value for their dollar. 

Your testimony goes into more detail on these points. but I think these facts are important 

and worth repeating. Millions of Americans arc benefiting !i'om the Affordable Care Act in 

ways that are life chunging. life saving and cost saving. 

Your budget includes important funding to ensLire effective aclministration of Medicare. 

Medicaid and CHIP. and continued implementation of the healthcare law. 

It is essential that Congress meet the President's budget request. Some of my colleagues 

may wish to deny your agency this funding in an effort to halt the progress of the health reform 

lavv. Such politics would jeopardize access to free preventive care. insurance coverage for those 

with incurable illnesses. and other preexisting conditions. and reduced costs for prescription 

medicines for the elderly. 

\Ve should not let that happen. 

Let Ille now turn briefly to provisions in the President's budget related to public health. 

First. I want to commend the President for his ongoing commitment to a strong and etfective 

Food and Drug Administration. We cannot have a better. more productive FDA by weakening 

its authority as some would have us do. What we need instead are adequate financial resources 

to back up it up: to make it possible tllr FDA to do its job to protect the health ancl safety of the 

American people. The President's budget does just that. 

Second. I also want to applaud the President for his support for biomedical research. 

coml11unity health centers. and our primary care workfl)fCe. Even in these difficult economic 
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times. it is critical that we maintain our investment in these programs that will pay big dividends 

to millions of Americans in the years ahead. 

But I would be remiss if r did not note my disappointment with the President's approach 

to the Prevention and Public Health Fund. Ilis proposed budget not only cuts the fund: it also 

uses the Fund to replace resources that have been taken away I,'om other public health programs. 

All this. despite what Democrats and Republicans -- and the experts -- have argued for 

decades: We must shift the foctls of our health care system to services and programs that keep 

people well. rather than continue to simply pay for medical treatments when they get sick. I 

know you share this vie" and hope that you will work with the Congress to help make it a 

reality. 

I recognize that the President's FY 2013 budget makes dillicult choices and spreads the 

responsibility for lowering our country's deficits across thc board. I don't agree with all of those 

choices. I don't support increasing costs for beneficiaries served by Medicare and Medicaid. 

But I do understand he has proposed this only in the context of shared sacrifice with the highest 

income among us. 

\Ve should recognize the President for having this balanced approach unlike the plan 

ofTcred by Republicans that targets low income and working class families. 

And I would be remiss in not mentioning that although healthcarc costs overall arc going 

up. Medicare and Medicaid have controlled cost growth better than private insurance over the 

last decade. The average annual growth rate per beneficiary was 4.6'\10 in Medicaid and 5.1 % in 

Medicare compared to 7.7% in private insurance. The Affordable Care Act provides 

opportunities to bring private insurance into the discussion of healthcare costs. 

Thank you tl)r taking time today to join us to discuss these important points. 

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77557.014

Secretary Sebelius Questions for the Record 

House Energy & Commerce Subcommittee on Health 

March 1,2012 

The Honorable Joseph R. Pitts 

I. The law makes clear that health insurance subsidies al'e only available to individuals and 

families enrolled in an American Health Benefit Exchange - which is defined in the law as a 

state-based exchange, Further, the law requires that in order to be eligible for exchange 

subsidies the individual must be, "enrolled in through an exchange established by the 

state," It is clear that many, ifnot the ma.jority, of states will not set np exchanges, which 

means the federal government will have to set up and run exchanges in these states. The 

law docs not allow subsidies to flow through federal exchanges. 

IRS Commissioner Shulman responded to a Congressional letter, signed by three members 

of the Subcommittee, on this matter stating, "The statute includes language that indicates 

that individuals are eligible for tax credits whether they al'e enrolled through a State-based 

Exchange or a Federally-facilitated Exchange." 

a. Secretary Sebclius, exactly where in the 2,200-page health care law is the term 

"federally-facilitated exchange" used? 

Answer: Section 1321(c) of the Affordable Care Act requires that if a stare does not elect to 

operate an Exchange. or if the Secretary determines that a palticular state will not be able to 

implement an Exchange. the Secretary shall establish and operate an Exchange within that State. 

The definition of "Exchange" in the Exchange Proposed Rule, published on July 15.2011 at 45 

eFR 155.20. provides that "Exchange means a governmental agency or non-protit entity that 

meets the applicable requirements of this part (part 155) and makes QIIPs available to qualified 

individuals and qualified employers. Unless otherwise identified, this term refers to State 

Exchanges. regional Exchanges, subsidiary Exchanges. and a Federally-facilitated Exchange." 

h. Can you provide this Committee with the specific language that authorizes the 

Administration to allocate funds to individuals via the federal exchange'! 

Answer: The responsibility tlll' issuing regulations related to premium tax credits is the 

responsibility of the Department orthe Treasury. Section 1.368-2 of the proposed regulations on 

the Health Insurance Premiut11 Tax Credit. published in the Federal Register on August 17.2011. 

describes certain requirements that make an "applicable taxpayer" eligible for the premium tax 

credit. Among these requirements is that the taxpayer. or the taxpayer's spouse or dependent is 

"enrolled in one or more qualified health plans through an Exchange." That rule defines 

"Exchange" by saying that Exchange has the same meaning as in 45 eFR 155.20. the Exchange 

proposed rule referenced above. including a Federally-facilitated Exchange. 
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77557.015

2. Before the Ways and Means Committee on February 28th, you indicated that there is a 

legal analysis snpporting the Administration's interpretation that subsidies conld bc paid 

to individuals enrolled in a qualified health plan in a federally-facilitated exchange. You 

committed to providing the Ways and Means Committee with such an analysis. Can you 

provide this Committee with any legal analysis done by the Administration on this issue as 

well? 

Answer: The responsibility for issuing regulations related to premium tax credits is the 

responsibility of the Department of the Treasury. Section 1.368-2 of the proposed regulations on 

the Ilealth Insurance Premium Tax Credit. published in the Federal Register on August 17, 20 II 

describes certain requirements that make an "applicable taxpayer" eligible for the premium tax 

credit. Among these requirements is that the taxpayer, or the taxpayer's spouse or dependent is 

"enrolled in one or 1110re qualitied health plans through an Exchange." That rule defines 

"Exchange" by saying that Exchange has the same meaning as in 45 CFR 155.20, the Exchange 

proposed rule retCrenced above, including a Federally-facilitated Exchange. 

3. The new health care law has created unprecedented and sweeping authorities fOI' the 

HHS Secretary to regulate the activities of health insurers, providers, drug and device 

manufacturers, and employers seeking to offer health insurance to their employees. 

Prcsidcnt Obama has called Super PACs a threat to democracy, yet he now says that 

cahinet secretaries, including yourself, will appear at fundmisers for a Super PAC that is 

supporting his campaign. Cabinet officials have participated in political activities in the 

past hut ncver before has a cabinet secretary been given such cnormous power to regulate 

such a huge industry and to reshape thc entirc landscapc of that industry. Will you ask the 

Presidcnt to rccusc you from appcaring at such fundraiscrs due to the potcntial that many 

peopk in the hcalth carc industry may feel coerccd into supporting the Prcsidcnt's Super 

PAC because ofthc cnormous regulatory authority you have over their operations'! 

Answer: Invitations to speak at political events are vetted by agency counsel to ensure 

compliance \\ ith fl:deral laws and regulations that govern the political activities of Senate 

confirmed presidential appointees. Among those rules is a requirement to ensure that the 

audience at any political event is not composed primarily of persons who have matters before the 

department. and organizations arc advised of the need to have a diverse group of attendees. 

4. Government actions that burden a constitutional right trigger a strict scrutiny standard 

of judicial review. As such, the government must demonstrate that its action serves a 

compelling governmcntal intcrest and that it is thc least restrictive means of furthering that 

interest. Given that fl'ccdom of rcligious expression is a right guaranteed in the First 

Amendment to the U.S. Constitution, did you consult with the Justice Department about 

the constitutionality of mandating that religious cmployers provide abortion-inducing 

drugs lind other prodncts that violate their religious teachings as part of their employee 

health plans'! 

Answer: Churches and other houses of worship are exempt from the contraceptive-coverage 

rule. and we are in the process of accollllllodating other religious organizations. 

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77557.016

On February 10.20 I 2, we issucd regulations linalizing last summer's amendmcnt to linal 

regulations on the exemption from the contraceptive coverage requirement for churches and 

similar organizations. The Fedeml Register publication also discusses the one-year enforcement 

sale harbor, which is detailed in separate guidance from the Departments. It also describes our 

intent to initiate a rulemaking to require insurers to offer certain objecting non-prolit religious 

employers plans without coverage for contraceptive services and simultaneously otter the 

employer's plan participants contraceptive coverage (with no co-pay) at no additional cost. It 

further indicates our intent to establish a similar policy with respect to self-insured group health 

plans. 

We received more than two hundred thousand public comments from individuals and 

organizations with different views on this subject. The Administration regularly meets with 

leaders from the faith community to discuss a wide range of issues. In addition. the 

Administration has met with over a dozen leaders from the women's advocacy community and 

spoke with many in Congress. All of the views were considered as we issued the recent final 

regulation. The Administration will continue to work with faith based organizations. insurers. 

and other interested parties to develop rules that respect religious liberty and ensure access to 

preventive services for women. 

5. The Food and Drug Administration's labeling for the drng known as "Ella" (ulipristal) 

states that the drug is contraindieatcd during pregnancy, citing animal studies showing its 

capacity to terminate a pregnancy. Yet Ella is on the HHS list of "contraceptives" that 

must be provided at no cost under your mandate. If you can classify this abort ion-inducing 

drug as a "contraceptive" now, can't you classify othcr abortion-inducing drugs as 

contraceptives in the future, thereby adding them to the list of mandated drugs that must 

be provided at no cost to cmployces of religious organizations'! 

Answel": Items included in the Women's Preventive Services Guidelines do not include 

abortifacients. FDA considers drug products intended for the prevention of pregnancy as 

contraceptives. Ella works prior to implantation of a fertilized egg and is considered a 

contraceptive drug product. Ella's labeling specifically states that it is not indicated for 

termination of an existing pregnancy and should not be taken in the case of a knO\vn or suspected 

pregnancy. 

6. Many religious organizations self-insure, which has enabled them to avoid ahortioninducing drug and contraceptive mandates in California and other states. Under Presidcnt 

Obama's so-called compromise these organizations will be required to pay for these things 

because they are the insurer. Is it YOUI' intention to eliminate this "safe harbor" that now 

exists for religious organizations in California and other states'! 

Answer: We intend to develop a policy through a collaborutive process to achieve the same 

goals lor scll~insured non-pmfit religious organizations \v ith religious objections to contraceptive 

coverage that we intend to craft for fully insured non-profit religious organizations with such 

objections. 

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77557.017

On February 10,2012, \\e issued regulations finalizing last summer's amcndment to interim 

Iinal regulations on the exemption n'OI11 the contraceptive coverage requirement for churches and 

similar organizations. The Federal Register publication also discusses the one-year enforcement 

safe harbor, whieh is detailed in separate guidance from the Departments. It also describes our 

intent to initiate a rulemaking to require insurers to offer certain objecting religious employers 

plans \vitholit coverage for contraceptive services and simultaneously offer the employer's plan 

participants contraceptive coverage (with no co-pay) at no additional cost. It further indicates 

our intent to establish a similar policy with respect to self-insured group health plans. 

We are listening to the concerns of religious organizations and are taking them seriously. As 

Sccretat·y, I speci flcally called for a one-year enforcement safe harbor when I originally 

announced the Departments' plans for moving lorward. The Administration has an open door 

when it comes to ideas. We look forward to engaging \\ith all interested parties, especially those 

in the faith communitics, the insurance industry, and women's health advocates, during the 

enforccmcnt safe harbor to achieve the best possible outcome for all concerned. 

7, Aftel' all of the publicity surrounding the president's February 10 press conference and 

after all of your media interviews following the president's announcement, the final rule 

that was submitted to the Federal Register that day said that there had been no change to 

the interim final rule. In other words, you did not make any change to the rule despite all 

the concerns expressed by religious organizations. \Vhy should religious organizations trust 

you to fix these problems after tbe presidential election when you have declined to make 

any tangible change so far'? Should they expect the president to disappoint abortion 

advocacy groups after the election when he has not responded to the concerns of religions 

organizations hefore the election? 

Answer: This Administration takes seriously the concerns ofreligiolls organizations. As 

Secretary, when I originally announced the Departments' plans lor moving forward, I 

specifically called l'or a one-year enforcement safe harbor period during which we intend to 

amcnd the preventive services coveragc regulations to further accommodate non-exempt 

rciigiolls organizations with religious objections to covering contraceptivc services. The 

Administration has an open door whcn it comes to ideas. We look l'orward to engaging with all 

interested parties. especially those in the faith communities. the insurance industry. and women's 

health advocates, during the enf'orcement safe harbor to achieve the best possible outcome 1'01' all 

concerned. 

8. The proposed accommodation continues to allow the Administration to force employers 

who are not religious in their official capacities to cover stel'ilization, abortion-inducing 

(h'ugs and contl'3ccption in their insurance plans, regardless of their personal beliefs, Does 

the Administration mcan hy this, to imply that the First Amendment protection for 

religious freedom only applies to government-recognized religions organizations'? 

Answer: On February 10,2012. we issued regulations finalizing last summer's interim linal 

regulations on tile exemption from the contraceptive coverage requirement for churches and 

similar organizations. The Federal Register publication also discusses the one-year enforcement 

safe harbor. which is detailed in separate guidance li'om the Departments. It also describes our 

4 
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77557.018

intent to initiatc a rulemaking to requirc insurers to otTer objecting non-profit religious 

cmploycrs plans without coverage for contraceptive services and simultaneously offer the 

employer's plan participants contraceptive coverage (with no co-pay) at no additional cost. 

There arc some religious organizations that would not he covered by the religious employer 

excmption and that do not currently cover contraceptives due to religious objection. Several 

sllch organizations submitted comments expressing concern about adjusting their plans to cover 

contraceptives and suggested they might simply cease offcring insurance coverage. The 

enforcement safe harbor, during which additional rulcmaking will yield additional 

accommodations for such organizations, responds to these particular concerns. While the safe 

harbor is in place, thc Administration will continue to \\Ol-k with faith based organizations, 

insurers, und other interested parties to develop rules that respect religious liberty and cnsurc 

access to preventive services for women. 

l.:nlike churches, religious hospitals and universities employ and serve people of all different 

faiths_ The policy goal is to ensure that womcn who work It)r such employers with religious 

objections to contraception coverage and who may not share their employers' religious 

objections to contraception would have access to it without cost sharing, even whilc ensuring 

that their employers do not have to pay for it. For example, a nurse working at a Catholic 

hospital should have thc same access to contraceptive services as a nurse working at a public 

hospital, even if the Catholic hospital should not have to pay for such services_ This is about 

making sure that employees of these organizations get the care they need while ensuring that 

these organizations that object to contraception on religious grounds do not pay for it. 

9. Has HIlS assessed the PPACA provision requiring states to raise Medicaid primary carc 

physician rat('s up to M('dicare levels in 2013 and 2014'! Has HBS analyzed what th(' 

financial impact on states will be to sustain those inereases after the Federal mandate 

expires and if so, please provide that analysis, 

Answer: The Centers for Medicare & Medicaid Services (CMS) is currently in the process of 

drafting a proposed rule to provide guidance on the implementation of the new requirements of 

sections 1902(a)( 13), 1902(jj), 1932(1), and 1905(dd) of the Social Security Act as required by 

the Affordable Care Act. While it is anticipated that the proposed rule will provide estimates of 

the costs/savings ofthc Affordable Care Act provision to both the Federal and State governments 

/(11' Calendar Years 2013 and 2014, we do not anticipate providing an estimate of the potential 

costs to States that choose to sustain the level of payment beyond 2014. 

10. One of the President's Medicaid proposals calls for a manipulation of the Federal 

match or a limitation of revenue sources States can us(' fOI' their Federal Match. Linder the 

President's proposed budget, states would receive a lower Federal match rate for the 

PPACA-mandat('(1 beneficiaries than originally promised ill PPACA. Please provide 

additional information to the Committee 011 how the blended rate would work for states, 

Specifically, please provide the Committee with the data and assumptions used to achieve 

the pnljectcd S18 billion in savings. 

5 
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77557.019

Answer: The Administration no longer supports the Medicaid blended F'v1AP proposal. We 

continue to seek efficiencies and identify opportunities to reduce waste, li'mld and abuse in 

Medicaid, and we want to work with Congress, states, and stakeholders to achieve those goals 

while expanding access to affordable health care. The Supreme Court decision has l11ade the 

higher matching rates available in the Affordable Care Act for the new groups covered even 

more important to incentivize states to expand Medicaid coverage. The Administration is 

[clClIscd on implementing the Affordable Care Act and providing assistance to states in their 

cl1,lI1s to expand Medicaid coverage to these new groups. 

II. The President's health care law included the creation ofthe CLASS pl'Ogram. HHS 

claims it has halted operations on the CLASS program after it concluded it had no path 

fonvard towaJ'd sustainability last fall. In light of the Administration's October 20t t 

anllounccmcnt that it had halted work on the CLASS program (after concluding the 

IH'ogram could not sustainable over a 75-ycaJ' pcriod), the Committee is concerned the 

Department should not usc any rcsources to further p"omotc the failed-CLASS prog,'am. 

However, as of February 16, 20t2, thc National Clearinghouse for Long-Term Care 

wcbsite still maintaincd information about the non-existent CLASS program services. Are 

you aware of such contcnt and can you agree to plcasc di,'cct the Administration on Aging 

to remove this information and any information regarding CLASS from the HHS website'? 

Answer: The information on the website has been updated. It provides only the following 

inf(mnation, "The Affordable Care Act authorized the creation of the CLASS Program a 

national. voluntary insurance program. Due to the October 14. 20 II, announcement by I·IIlS 

Secretary Sebelius that implementation of the CLASS Program has been suspended. the CLASS 

Program is not available." There is a link to the copy oCthe October 14.2011 CLASS Report. 

6 
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77557.020

The Honorahle Michael C. Burgess 

1. In 2011, the cost of caring for those with Alzheimer's disease to American society will 

total an estimated $ 183 billion but only spends $450 million on Alzheimer's research. 

Despite the relatively low level of funding, the Alzheimer's research community has come a 

long way in moving Alzheimer's science forward, particularly in the last ten years. It's my 

understanding that we are at a scientific tipping point -- there are huge scientific 

opportunities that are waiting to be undertaken in order to save millions of lives and result 

in significant returns on our investment. The President's Budget includes an $80 million 

request specific to Alzheimer's disease at the National Institutes of Health to meet the vast 

scientific opportunities available to us -- can you explain how thc additional $80 million will 

be used to fund new scientific opportunities? Are you essentially saying that as a public 

policy matter it is not only in the interest of millions of patients and their families, but also 

in the interest of taxpayers to do something about Alzheime,"s now? Patients win and the 

cost cUrl'e will be bent if we delay or prevent the costs and complications of the disease? 

Given that we'vc seen this crisis coming for years, why hasn't the National Institute on 

Aging, the primary Federal agency supporting and condncting Alzheimer's research, 

requested increases in their budget in the last five years? Will any of the new funds he 

directed towards the newly established National Center for Advancing Translational 

Scicnces to push discovery closer to therapies for people living with this disease? 

Answer: Alzheimer's disease (AD) continues to be a major public health issue. Currently. 

between 2.4 million and 5.1 million Americans suffer from the disease. and this number is 

expected to increase dramatically with the aging ofthc American population. The development 

of interventions to prevent or delay the onset of AD. or to ameliorate the symptoms of the 

disease. remains a high priority for the National Institutes of Health (NIH) and the Department. 

Research on Alzheimer's disease and cognitive aging is conducted throughout the NIH. with the 

National Institute on Aging (NIA) serving as lead federal agency for AD research. Similar to the 

NIH budget request as a whole. the NIA budget request retlects multiple compelling 

programmatic priorities and balances needs and scientific opportunities within the context of the 

funds made available through the annual NIH appropriation. 

In Fiscal Year 2012. ~IH will invest an additional $50 million in funding to accelerate research 

on /\lzheimer's disease. In addition. the President's Budget request for FY 2013 includes a 

further investment of$80 million lor Alzheimer's disease research li'om the Preve11lion and 

Public Ilealth Fund. Planning for initiatives supp0l1ed by these FY 2012 funds will be informed 

by the National Alzheimer's Plan and from the recommendations fi'ol1l the National Alzheimer's 

SUl1lmit. \\ hich will be held May 14-15. 2012, We anticipate that new N Iii-supported research 

projects will f(1CUS on key areas in which emerging technologies and new approaches in clinical 

testing allow for a more comprehensive assessment of the discase. This research holds 

considerable promise ft.lr developing new and targeted approaches to prevention and treatment. 

Specifically. two majOl' clinical trials are being funded with the increased FY 2012 funds, The 

first is a study of an insulin nasal spray f()r treating Alzheimel"s disease. following up on 

encouraging l'Cslilts of a pilot trial reported late last year, The other will study vl/hether an 

7 
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77557.021

antibody treatment, crenezumab, designed to bind to and possibly clear away abnormal amounts 

of amyloid protein in the brains of people with Alzheimer's, can prevent decline in cognitive 

function in people at high risk of developing the disease. This will be the first clinical trial to 

focus on people who arc cognitively normal but have an elevated risk of developing AD. 

The $80 million allocation from the Prevention and Public Health Fund for NIlI-suppol1ed 

research on AD in FY 2013 would be used to support the full spectrum of research with a focus 

on carly diagnosis and prevention. The investment would be used to further the basic science 

required as a foundation for new interventions, advance translational research, and support 

clinical trials of prevention interventions. Basic research, translational research, and clinical 

trials or new intervention strategies would be solicited, received, and subjected to expert peer 

review to determine merit tor funding, 

2. Regarding CMS's plans for a prior authorization for power mobility devices - as we have 

discussed, physicians will playa huge role in the success of this program, We share the 

same concerns-ensuring their patients receive the appropriate medical care without 

unnccess,u'y delays. We want to work with all affected stakcholdcl's to ensure this 

demonstration program docs not jeopardize acc('ss to this important benefit. As you know, 

In the Medicare Prescription Drug, Improvement, and Modernization Aet of 2003, 

Congress mandated a face-to-face examination be condncted of the beneficiary prior to any 

payment for a power mobility device, Medicare contractors, however, routinely seek the 

"longitudinal history" of the patient, rather than give greater weight to the actual physician 

face-to-face examination and often times; the results of the face-to-face examination arc 

disregarded, largely because the Medicare contractors ignore information contained on 

physician templates, The contractors have stated in the past that they do not consider such 

templates to bc part of the medical I'ccord, If the calTiers conduct the prior authorization 

program in this manner, very few beneficiaries will receive mobility assistance. My office 

continues to have concerns with the reported 50-90% audited error rates being released by 

CMS' contractors, I am advised that this error ratl' is a direct result of confusion among 

physicians as to the proper paperwork needed to properly prescribe mobility devices on 

behalf of their patients, In fact, I regularly hear from stakeholders regarding a lack of 

clarity and consistency associated with the paperwork needed to properly file claims on a 

beneficiaries behalf, Although CMS has agreed to develop such a template, it has yet to he 

released. When will CVIS release the PM)) face-to-facc evaluation template that physicians 

can .'ely on to estahlish medical necessity and validates that the tl'eating physician 

conducted the congressionally mandated face-to-face medical evaluation of the patient? 

Answer: eMS is in the process of developing an electronic clinicaltcmplatc as part of 

provider's ekctronic health records (EHR). An initial draft of the tcmplate is availablc on the 

eMS website at hllP:;!\'\lD-":,f!l.1S..lliJYIRe;;C:'1rch-Statistics-[)gljl::gl1<l=~;;.tcl11s/(:(~uter:.!2ata:il.I}.<J: 

S\skl11,;/I·:S:vlD'L!ectf\lllic·ClinicaITemplate.html CMS is actively seeking input on this templatc 

and stakeholders ean submit commcnts on the dran to £fJiD.ic.illJ"IJ.lllialSj] ems.hhs.l""v, In 

addition, CMS \Viii host a series of Open Door Forums to allow suppliers to comment and submit 

feedback Oil the draa template; the schedule fix future ODFs can be round on the eMS v\ebsitc. 

8 
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77557.022

3. It's been almost 2 years since enactment of PPACA, yet the Administration has not 

issued any of the critical rules states and others need for 2014. Given the immediacy of the 

exchange implementation timeline, when can we expect the final rule on state health 

insurance exchanges to be released'! Will the final rule address implementation issues vital 

to launching successful insurance exchanges including: granting states flexibility with 

regard to meeting consumer needs, streamlined exchange requirements and certainty with 

regards those requil'emcnts necessary for fedcral approval of state exchanges? 

Answer: HIlS released the final rule for State Innovation Waivers on February 22, 2012 which 

gives states the tlexibility to find the health care solutions that work best for them, and pursue 

innovative strategies to ensure their residents have access to higher quality, affordable health 

insurance. The Depat1ment has also issued proposed rules. and plans to release final rules on 

Medicaid Eligibility. Exchange Establishment and Premium Stabilization in the near futme. In 

addition. we will release sub-regulatory guidance on the Federally-Facilitated Exchange. 

Exchange Certification, and the operations of the federal risk adjustment and reinsurance 

programs. The Department will continue to consult with stakeholders and issue necessary 

guidance as "e continue to implement the AITordable Care Act. 

4. When will all thc other rules be released? The assumption is open enrollment will bcgin 

\0/\/20\3. States, cmployers and insurers can't be expected to invest thc hundreds of 

millions of dollars required to implemcnt the law without final rules, can they? And how 

can they move fOl'\vanl with only a few rules. 

Answer: We agree that States. issuers, and other stakeholders need final rules in order to move 

forward on Exchanges. and we expect to finalize the Exchange rule in the near future. The intent 

of the proposed rule is to afford States substantial discretion in the design and operation of an 

Exchange. with greater standardization provided where directed by the statute or where there are 

compelling practical. efficiency or consumcr protection reasons. and give all stakeholders a 

chance to provide fCedhack and see what approach that HI-IS intends to take with Exchange 

establishment and implementation. The final rule will set f0l1h the minimum Federal standards 

that States mllst meet if they elect to establish and operate an Exchange. 

5. What arc some proposals in the Administration's FY 13 budgct request that would 

address these issnes: 

a. Spccifically, would the proposed increase for the Biomedical Advanced Research 

and Development Authority (BARDA) fund additional antibiotic R&D? Given that 

a report card isslled last October by the WMD Center gave the U.S. a grade of "F" 

for our ability to respond to a biotcrnlr attack involving drug-resistant pathogens, I 

believe BARDA mllst strengthen its investment in antibiotic R&D. Do you agrec? 

Answer: BARDA's Broad Spectrum Antimicrobial Program is focused on developing novel 

antibacterial and antiviral drugs lor the treatment or prevention of disease caused by currently 

delined and future biological threats. Recognizing the immediate value ornew antimicrohials in 

addressing the increasingly prevalent public health threat of antibiotic resistance, as well as the 

likelihood that antimicrobial resistance will complicate primary treatment of a wide array of 

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77557.023

threats, BARDA is supp0l1ing the development or public-private partnerships for the 

development of novel antimicrobials, Through these partnerships, BARDA will support the 

development of candidate antimicrobials for their commercial, clinically prevalent infectious 

disease indications, as long as our private sector partners concomitantly SUPpO!1 the development 

of these products for biodcfense threat agcnt indications. By adopting this approach, BARDA 

v\ ill suppO!1 the development of new classes of antimicrobials, increase the number of 

antimicrobial drugs in thc developmental pipeline, address the important and immediate threat of 

antimicrobial resistance, and prepare the nation for the predictable threat of biological terrorism 

and the unpredictable threat of emerging infectious diseases. 

b, The Administration proposed flat funding for the National Institutes of Health 

(NIH) and only a small ($ IO million) increase for the National Institute of Allergy 

and Infectious Disease (NIAID)--the institute with the responsibility for research on 

antibiotic resistant infections, Why doesn't the Administration feel it is necessary to 

increase our investment in this critical area? 

Answer: The FY 2013 President's Budget prioritizes NIH biomedical research as an investment 

that promises to deliver better health and drive economic growth. Within the FY 2013 

President's Budget request, the National Institute of Allergy and Infectious Diseases (N lAID) 

will continue to support basic research to identify new antibiotic targets, translational research to 

develop new medical countermeasures (drugs, diagnostics and vaccines) and clinical research to 

study strategies to combat antibiotic-resistant infections, As part of this effort, NIAID provides a 

broad array ofpreelinical and clinical research resources to !'esearchers in academia and industr) 

tu help facilitate product development. By providing these critical services to the research 

comlllunity, NIAID can help to bridge gaps in the product development pipeline and lower the 

financial risks incurred by industry to develop novel antibiotics. NIAID plans to continue this 

impol"lant work in FY 2013. 

A signilieant amount ofNIAID's drug development portfolio, including research and 

development of novel antibiotics, is supported by grants awarded through the Institute's 

Partnerships Program. NIA!D's Partnerships Program supports collaborative etT0!1S and 

multidisciplinary approaches to advance candidate products or platform technologies through the 

product development pathway, and has supported numerous grants addressing antihiotic 

!'csistance since its inception in 2000. Recent awards include work to advance the development 

01' diagnostics and therapeutics I()r drug-resistant pathogens and pathogens that are at risk for 

devcloping drug resistance, In FY 20 I I, N IA ID issued the "Targeting Resistance in Select 

(;ram-Negative Pathogens" phased innovation award research initiative. This initiative targets 

early-stage research towards the development of novel therapeutic approaches to treat resistant 

Gram-negative bacteria. NIAID anticipates making awards for this initiative in the spring of 

2012. In FY 2012, NIAll) issued the ·'Partnerships for Development of Therapeutics and 

Diagnostics for Biodefensc" which focuses, in part, on the devciopment of new therapeutics 

targeting antibiotic-resistant pathogens. Partnership a\Yards are anticipated to be made in FY 

2013. 

NIi\lD also supports the preclinical development of new antibacterial agents through contracts to 

companies involved in novel drug design and synthesis, These contracts were solicited thl'Ough a 

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Broad Agency Announcement entitled "Development of Therapeutics lor Biodefense:' Work 

under these contracts aims to develop four different classes of drugs that have the potential to 

treat multi-drug resistant (MDR) bacterial infections. A similar Broad Agency Announcement is 

planned for FY 2013. 

To foster clinical research on antibiotic resistance, in January 2012, NIAID released a Request 

Illr Applications to support a new leadership group for an antibactel'ial resistance clinical trial 

network sil11ilarto the existing \lIAID IllY/AIDS clinical research networks. The award will be 

made in FY 20 J 4. The antibacterial resistance leadership group will develop and implement a 

comprehensive clinical research agenda to address the pressing problem of antibacterial 

resistance, and \\ ill have the capability to test new antibiotics as well as currently available 

antibiotics in clinical studies; the latter studies will help inform the rational use of existing 

antibiotic drugs to help limit the development of antibiotic resistance, This work will 

complement current NIA ID-supported clinical trials designed to determine proper antibiotic 

dose, treatment duration, and whether antibiotic treatment is necessary in all cases. 

6, Please provide more information about the assumption that the contraceptiYe and 

sterilization mandate on thc whole is cost neutral for insurance companies. These questions 

are din'cted to the contraceptive/sterilization mandate as a whole, not just those covered by 

plans purchased by religions employers. 

a, Will plans will be required to coycr all FDA approved methods of contraception 

including namc brand methods and high cost methods such as sterilization, IUDs 

and implants? If so, by how much will cost increase for plans that currently coyer 

gcnerics and lower cost methods to now cover name b.'amls and higher cost 

methods'! Please pnlvide an estimate for the increased cost of such a switch, In 

addition please pnlvide studies showing that the inc.'cased cost of covering higher 

cost and name brand methods in a plan is offset by marginal savings within that 

plan even though they already cover some form of contraception, 

h, According to the Alan Guttmacher Institute's webpage "Virtually all women in 

the United States aged 15-44 who have ever had sex have used at least one 

contraceptive method (99%). Currently, only 7'1.. of sexually active women who arc 

at risk fOl' unintcnded pregnancy are not using contraceptives," How much 

mlditional "marginal" cost will be added by individuals in the 93% of sexually 

active womcn switching frolll a low cost generic method to a high cost method'? 

Please provide studies demonstrating the cost of individuals switching to a more 

cxpcnshe method. 

c, Please indicate what percentage of the 7% not using contraception are doing so 

bccause they have no insurance or their insurancc company doesn't cover 

contraccption at all, what perccntage of the 7% arc not using a mcthod because they 

cannot affOl'd a co pay, and what percentage of thc 7'1.. arc not using contraccption 

for non-financial reasons, Please provide the specific studies you used to answer this 

question, 

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d. Please provide studies or cost-bencfit analysis that specifically studied the 

mal'ginal cost of individuals switching from a low cost method to a high cost mcthod 

versus the marginal benefit of those who had not used a mcthod starting to? 

Answer: The women's preventive services guidelines include all fDA-approved contraceptive 

drugs and devices. including both brand name and generic. The Affordable Care Act and its 

implementing regulations allow plans to use reasonable medicalmanagemcnt techniqucs to 

control costs. Plans may lISC reasonable mediealmanagemcnt techniques to steer patients 

towards a generic version of a prescription medication that is part of a recommended preventive 

service. provided the plan accommodates any individuals for whom it would be medically 

inappropriate by having a mechanism for waiving the otherwise applicable cost-sharing for the 

branded version. 

Considering that many of the recolllmended services are already covercd by most group health 

insurance plans "" already with low or no copaymcnts the estimated average impact on 

employer' plan premiums is very small. Actuaries and experts agree that covering contraception 

actually saves money for insurance companies. The cost of contraception coverage is low and 

tends to be more than olTset by the savings that result from improved health and fewer unplanned 

pregnancies. For example: 

A study by the National Business Group on Health estimated that it would cost employers 

15-17% more not to prov ide contraceptive coverage in employee health plans than to 

provide such covcragc. alier accounting for both the direct medical costs of pregnancy 

and indirect costs such as employee absence and reduced productivity, 

• Whcn contraceptivc coverage was added to the Federal Employees Health Benefits 

Program. premiums did not increase. 

• And 22 States including Pennsylvania have family planning waivers in Medicaid that 

have significantly expanded coverage of these services without increasing State or 

Federal costs (i .e .. they are budget neutral), 

As such. it is hard to argue that insurers need to raise premiums for coverage that lowers costs. 

7. Texas submitted a III 5 Demonstration \Vaivcr renewal of the "'omen's Health 

Program to CMS this past fall. This program provides low income Texas women with 

famil'y planning and certain preventive screenings including brellst and ccrvieal cancer 

screenings. CMS sent Texas a lettel' that mcntions that Texas cannot deviate from the 

requircments of section 1902(a)(23) of the Act in order to restrict beneficiary choice of 

qualified family planning providers under the program. Texas believes that states have 

been delegatcd the authority to determine qualified providers arc under the ,\1edicaid 

JH·ogram. 

a. The Texas ''''omen's Health Waiver program saves money and pl'Ovides 

preventative eare and family planning to low income women, why is CMS dclaying 

approval of the Waiver'! 

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Answer: As you know, Texas has electcd to move forward with a state rule that will restrict 

fi'ccdom of choice of health care providers for women enrolled in the Women's Health Program 

effective March 14,2012, Consistent with longstanding statutory provisions that assure li'ee 

choice of family planning providers, the Demonstration docs not provide the State the authority 

to impose such a limitation, and we adv ised the state in letters dated December 12.20 II, and 

March 15.2012. that such authority would not be granted, In light of the Statc's preference to 

move f()!'ward in implementing the state rule. the Centers for Medicare & Medicaid Services 

(CI'v1S) stated that it is not in a position to extend or renew the current Demonstration. except for 

purposes of phasing out the Demonstration. 

b. Cl\IS has had concerns over access and provider choice after the implementation 

of the state law prohibiting abortion providers and affiliates from participating in 

the WHP program. However, Texas has over 2500 WHP providers, of which only 

are.t.t planned parenthoods, in over 4600 sites. Texas Health and Human Services 

Commission reports that there arc over 2500 WHI) providers and over .t600 sites, 

excluding abortion providers. I have heard that you are concerned about access. 

Since Texas Health and Human Services Commission has proven that access to care 

will not be limited across the state by these numbers, why would you effectively 

deny low income women access to this care by denying the waiver? 

Answer: Federal law prohibits federal Medicaid dollars from being spent on abortion services. 

Fcticral law also prohibits states li'om restricting access to providers simply because of other 

services they may olTer. CMS was unable to extend or renew the current Demonstration. except 

f(lr the purposes of phasing out the Demonstration. because Texas has elected to move lorward 

with a state rule that will restrict the fi'eedolll of choice of health care providers for W0111en 

enrolled in the Women's Health Pl'Ogram. which violates federallavv. 

c. States limit who can be a qualified provider under the Medicaid program. In 

Texas, we prohibit providers that are delinquent on taxes, child support or 

providers that under investigation for suspccted abuse. Since you are disagreeing 

that Texas can prohibit abortion providers and their affiliates from being a 

qualified provider, do you disagree that Texas has the authority to prohibit these 

other categories? 

Answer: One of the fundamental aspects of the Medicaid program is thc statutory provision at 

section 1902(a)(23)(A) ol'the Social Security Act which provides that Medicaid beneficiaries 

may obtain covered services from any qualilied provider willing to undertake the service. 

Section 1902(a)(23 )(11) sets f(mh additional protections for a beneficiary'S free choice of famil) 

planning provickrs. Texas requested approval to limit access to specific providers for reasons 

not related to their qualilieations to provide slich services. 

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77557.027

The Honorable John Shimkus 

I. Then' has been a lot of discussioll about the cost of Medicare fraud, waste and abusc; 

estimates indicate between S48 billion and S60 billion are stolen out of the Medicare system 

each ycar. While I would not suggest that efforts to invcstigatc improper payments and 

fraud should be discontinued, resources should be allocated to the prevention and detection 

of fl'aud and abuse. Stopping thc frand before it happcns better protects the Medicat'e 

system, and allows us to be good stewards of taxpayer funds. Additionally, identity theft 

has been an increasing scourge our seniors have had to suffer becausc the Centers for 

Mcdicare and Medicaid Services (CMS) insists on printing each Medicare recipicnt's 

Social Security number directly on the Medicare card. Lastly, legitimate Medicare 

providers the doctol's and medical professionals dispensing front-line Medicare services to 

our seniors - are likewise impacted by gross inefficicncies and inaccuracies in the billing 

system allowing their Medicare provider numbers to be stolen and used by criminals and 

thien'S to scam Mcdicare. 

Thc number of participants in the Mcdicare system is projectcd to swell to over 79 million 

beneficiaries by 2030. It is clear that the Medicare system will need to do more with less. I 

am a cosponsor of H.R. 2925, the Mcdicare Common Access Card Act, which will verify 

Medicare transactions before paying providers, as well as modernizing the Medicare card 

to take the Social Security number off the front. 

a. Plcasl' explain to the Committee to what extent HHS and C\1S have investigatcd 

other smart card programs around the world as a possible solution to prevent 

fraud-and abuse within the Medicare system. 

Answer:: I share YOllr commitment to stopping waste. fraud and abuse in the Medicare program 

and your interest in learning what technologies can help LIS fulfill that cOlTlmitment. eMS has 

begun inyestigaling the potential application of smart card technology to the Medicare program. 

including the pllssible benefits in preventing fraud, and the costs of il11plementation. 

b. In 20()6, Congress, through the Labor Health and Human Services and Educatioll 

appropriations bill, directed HBS to remove the Social Security number from the 

Medicare canl and your agency has resisted. Can yon please tell the Committee why 

IIIIS has seemingly been unintl'rested in addressing this critical issuc, and what 

plans you have to remedy this serious problem'! 

Answer: I certainly share your concerns about protccting Medicare beneficiaries li'om identity 

thell. We have taken many important steps to eliminate unnecessary display of Social Security 

Numbcrs (SSNs). such as removing SSNs li'om various notices and publications sent to 

bcndiciaries and from bcncilciary reimbursement checks. We have also taken action to educate 

bcneilciarics about steps they should take to prevent identity theft and fraud. 

c. Plcase cxplain to the Committee to what extent 1I11S and CMS have investigated 

and the inefficiencies surrounding the current Mcdkarc rcimbursement system, and 

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77557.028

what kind of waste can be eliminated by moving to a system whcl'e bcneficiaries and 

provider arc authenticated and vedfied befOl'c payments are made. 

Answer: The Affordable Care Act provided the Centers for Medicare & Medicaid Services 

(CMS) with significant new authorities to enhance its oversight of Medicare, helping shill the 

f(JCUS to ft'aud prcvention by providing new authorities to increase screening of providers and 

suppliers bef(xc they enroll in any of these health programs. implement temporary moratoria on 

new providers in high risk areas, and estahlish requirements for compliance programs. These 

ncw activities are complemented hy the passage of the Small Business .Iohs Aet of 20 I (), which 

required eMS to implement predictive analytics technology, and provided financial resources to 

do so. eMS is now deploying predictive analytics technology in its Fraud Prevention System 

(Ff'S) to review all Medicare fec-for-service claims prior to payment. For the first time, C\1S 

has a real-time view of fee-for-service claims across claim types and the geographic zones of its 

claims processing contractors. This allo\\'s C\1S to more easily identify fraudulent providers hy 

detecting patterns and aberrancies. 

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77557.029

The Hononlble Mike Rogers 

I. The Administration has recognized the severity of the nuclear threat on multiple 

occasions. Yet BARDA's attempts to procure medical countermeasures for Acute 

Radiation Syndrome (ARS) under I'rojcct BioShield thus far have been unsuccessful. The 

ma.jority of BARDA 's Advanced Research and Development (A R&D) funding to address 

ARS has gone to vcry early stage products or academic institutions. And there appears to 

be a lack of prioritization of future AR&D funding in addressing this threat. Can you 

explain the apparent disconnect between the Administration's goals and BARDA's 

actions'? 

Answer: IIHS has sought tl'om the beginning to make available medical countermeasure 

products to treat unfortunate individuals exposed to ionizing irradiation. In the carly days of 

Project l3ioShield DTPA. Potassium Iodide. and Prussian Blue were acquired to remove 

radionuclides from affected persons. Since acute radiation exposure results in mUltiple 

syndromes affecting the immune system. gastro-intestinal tract. skin. lungs. and the brain. 

difTcrent medical countermeasures were sought for each or several associated illnesses. Until 

recently. there have not been medical countermeasures candidates tClr treatment of the illnesses 

associated \vith ARS that are mature enough for regulatory acceptance or available from the 

ll1anUf~leturers of licensed products for other indications. To this end. BARDA has invested in 

the early development of 23 product candidates since 2009 investment to treat these different 

ARS-3ssociatcd illnesses. From this portf(llio. some of these small molecule and recombinantbased drug candidates or cell-based therapies will succeed through advanced development and 

become mature enough for acquisition under Project BioShield in FY 201.:1-2018. Thus the 

country will be prepared to treat more than just one ARS-associated illness. 

For the ;\RS-associated illness neutropenia - that drugs may be available. BARDA sought to 

acquire in 2008 licensed cytokine drug products under Project BioShield. however the primary 

manufacturers of these licensed products did not respond to the solicitation. They did not wish to 

seck regulatory approval of their products for an ARS anti-neutropcnia indication fearing that an 

adverse event or untO\vard side effect might endanger their multi-billion dollar franchises. 

Today. after several years of constant interaction. manufacturers of these fDA-approved antineutropenia drugs. which are used to treat immune disorders. have expressed an active interest in 

working with i'lARDA to expand the use of their licensed products to treat radiation illness. To 

support this acquisition. a solicitation under Project HioShicJd will be issued by BARDA in the 

summer of 20 12 for the purchase of anti-neutropenia products and funding of late-stage 

development studies to make the products available. if it is determined that this is necessary. 

under Emergency Use Authorization and to support approval or licensure lor the ARS indication. 

Contracts for one or more these products are expected in 2012, and products would be available. 

through approval or through authorization for use in an emergency. for radiation-induced 

neutropenia b) next year. 

2. A key objective of the Pandemic and All Hazards PI'cparcdness Act was to ensure 

continued involvement of innovative biotechnology companies in the badly underserved 

biodefense sector. Yet, we understand HAlUlA has informed companies willing to develop 

their products to address high priority threats that there will he no new Advllnced 

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Rcsea"ch & Dcvelopment (A R&J) contracts in FY 2012 and possihly FY 2013 due to prior 

commitments. 'Vhat is the "cason for this dccision'? 

Answer: Aller H boom year for introducing 23 new MCM candidates into the CBRN MCM 

development pipeline in FY 20 II to reach a total of 80+ product candidates. available funds 

($415 million) in FY 2012 will cover expenses of existing MCM candidates already under 

support rrom BARDA (>90%) and only a few new product candidates. Irthe Presidenfs Budget 

in FY 2013 for BARDA ARD programs ($587 M) is approved by Congress. then both existing 

and additional new MCM candidates can be suppOlied to fill the remaining gaps in broad 

spectrum antimicrobials and antivirals and chemical antidotes. 

3. Along with Hepresentative Lois Capps, I personally championed the Pain Care Policy 

Act, major portions of which hecame law in 2010. One result of that cffort was thc 

landmark Institute of Medicine Rcport on "Relieving Pain in America" issucd iu June of 

last year. The 10M found that chronic pain is a puhlic health problem in this country of 

enormous proportions, and called on HHS to develop by the end of this year a 

comprehensive population level strategy to address it, with specific focus on prevention, 

tr'clltmcnt, management and research. Can you briefly tell us what your office is doing to 

implement this recommendation, who is in charge of it, and when we might see such a 

strategy to guide future efforts at the Department? 

Answcr: More than 100 million Americans suiTer il'om migraines, arthritis and other chronic 

pain conditions" ith an annual economic toll of nearly S600 billion inmcdical bills and lost 

productivity. To help address this problem. Congress dit'ected the U.S. Department of Health 

und Humun Services. through the Affordable Care Act, to create a new Interagency Pain 

Research Coordinating Committee. Its members. announced on February 13.2012. by the 

National Institutes of Health (NIH). include biomedical researchers. reprcsentatives fi'om 

nonprolit public advocacy organizations, and representatives of seven federal government 

organizations that deal vvith pain research and patient care. The Federal agencies comprise the 

Department 01' llealth and Human Services (HHS). including NIl!. the Centers for Disease 

Prevention, the Food and Drug Administration. and the Agency for Ilcalthcare Research and 

Quality: the Veterans' Administration: and the Department of Defense. This is a Secretarial 

Committee reporting to the Secretary. IIIlS. which is chaired by Dr. Story Landis. Director. 

National Institute ofNcurological Discases and Stroke. NIH. 

The committee \" ill work to identify critical gaps in basic and clinical research on the symptoms. 

causes. and treatment of pain and will recommend rederal research programs in these areas. The 

fClCUS will be to coordinate pain research activities across the ICderal government with the goals 

or stimulating pain research collaboration. fully leveraging the government resources dedicated 

to supporting pain research, and providing an impOt"tant avenue for public involvement. The 

committee will explore public-private partnerships to broaden collaborative, cross-cutting 

t'esearch and consider best practices in disseminating information about pain to publ ic ami 

pmiessional audiences. The committee has been specitically charged with making 

t"(commendations on how to best disseminate information on pain care. and NIH is working 

tog<:thct' \I ith other member federal agencies to collect information on current dissemination 

ciTmts in order to inillnll these recommendations. 

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77557.031

The committee appointees include leading federal officials together with six non-federal 

scientists. physicians. and other health professionals. as well as six members ufthe general 

public who are representatives of leading research. advocacy and service organizations. 

Aller tracking the work of several government agencies that conduct and support pain research. 

the committee ",ill develop a report on scientific advances in the diagnosis. prevention. and 

trcatment of clmlllic and acute pain. 

4. As you know, Osteogenesis Impel'fecta (01) is a rare inherited disorder caused by a 

genctic mntation that affects thc hody's production of collagen. Approximately 25,000 -

50,000 Americans may he affected hy 01, which is charactel"ized hy fragile bones that 

bl"cak casily and I'elated connective tissue symptoms. Thc most sevcre form of the disease 

usually leads to death shortly after birth; while most affected individuals survive into 

adulthood, it is not uncommon for persons with 01 to experience scveral-hundred 

debilitating breaks over the course of their lifetime. In addition to f!"actures, it is thought 

that 01 causes many other serious chronic conditions, such as pulmonary alld 

canlioyascular disease, which appear to increase in severity with age. Unfortunately, the 

impact of 01 on adults, in particular, is not well understood. There is a great need for 

IUltural history studies that will facilitate the development of clinical practice guidelines for 

adults living with 01. What are the plans of the ~ational Institute of Arthritis and 

Musculoskeletal and Skin Diseases (~IAMS) with regards to its 01 research portfolio ill FY 

2012, FY 2013, and beyond'? To what degree are NIAMS and the National Institutes of 

Health (NIH) in general focused on working with scientific invcstigators and clinicians with 

expertise ill 01 011 addressing the specific concerns of adults with Ol'? 

Answer: Thc NIH supports research identitied hy its peer review process as heing scientitically 

meritoriolls and impactfuL Applications fllr projects, including those involving natural history 

studies 01'01. arc welcomed. The success of this rigorous two-stage peer review process has 

been a critical and highly respected component in the development of the NIH research portfolio. 

The NIA:\1S has funded two conference grants to the Osteogenesis Imperfecta Foundation in 

2010 and 2012. These two meetings have brought together leading 01 researchers and clinicians. 

as well as adults living with 01 to review Clirrent knowledge regarding the impact orOI on a 

wide range of hody systems during the aging process. identify major information gaps. and make 

recommendations to expand the 01 research agenda. 

rhc NIMvlS supports a broad portfolio of bone biology and musculoskeletal research that is 

relevant to 01. Advances in these programs help to intcxm the field 01'01 research and. 

ultimatciy. improve the quality oflife of patients. In addition. NIAMS-funded research supports 

work aimed at applying the tools of genetic and stem cell technology to develop therapies that 

could correct the underlying genetic defects in 01. For example. scientists have shown that it is 

pnssible to inactivate the abnormal copy of the collagen gene in isolated cells. If a way can be 

fllllnd to reintroduce the modified cells into the patient. this could provide therapy tllr some of 

the most severe fClrIns orOI. However, the many steps required tl)r the inactivation of the 

disease-causing gene result in a loss of proliferative capacity, making ilunlikely that the 

modified cells could grovv into large enough populations in patients to improve outcomes. Most 

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reccntly. using SUppOlt provided by the American Recovery and Reinvestment Act. researchers 

hal c shown that the methods used to produce induced pluripotent stem cells (sometimes said to 

··reprogram·· mature cells to resemble their progenitors) can markedly increase the proliferative 

capacity of the modified cells. This could improve chances for long-lasting therapeutic benefit 

in Of patients or all ages. 

Researchers at other NIH Institutes who have an extensive history studying connective tissue 

disorders including OJ have been valuable partners with the NIAMS to support studies on the 

disease. Most recently. a team of investigators vvithin the NIH·s intramural research program 

collaborated with NIH-funded scientists Ii·olll outside institutions to discover the third in a 

sequence of genes that accounts for previously unexplained torms of 01. The newly identified 

gene contains the information needed to make the protein Cyclophilin B. This protein is part of a 

complex of three proteins that modifies collagen. folding it into a precise molecular 

configuration. hefore it is secreted from cells. Collagen functions as molecular scaff()lding that 

holds together hone. tendons. skin. und othcr tissues. Most types of 01 result from a dominant 

mutation in collagen itselj~ requiring only one copy of the mutated gene to hring ahout the 

dismder. 01 involving the Cyclophilin B gene, however. is a recessive trait, requiring two 

defective copies of the gene to cause the disorder. The discovery provides insight into a 

previously undcscribed form of Of and provides new inlonnation on how collagen lolds during 

normal hone till"lnation. which may also lead to greater understanding of other bone disorders. 

The :'\iIAMS Advisory Council. a second tier of the NIH peer review systcm. is comprised of 

scientilic and lay members who have expertise in the mission areas orthe Institute. The Council 

provides advice on broad policy issues. as well as making recol11ll1endations on research 

proposals. Ms. Michelle Holhinc. a registered nurse and parent of" a child who has 01. \Vas 

recently added to the Institute's Council. 

19 
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77557.033

The Honorable Marsha Blackburn 

I. Secretary Sebelius, last year 104 Honse Members wrote to you about the National 

Diabetes Prevention Program (NDPP), a successful, targeted, public-private financed and 

community-based intervention (between the YMCA, lInitedHealth Group, and the CDC). 

It has been demonstrably successful in reducing participants' risk of developing diabetes 

(58':1.. oyerall: 71 % for people 65+). Well, I am pleased to hear that you did release S 10 

million in FY 12 funding to the CDC for NDPP implementation. So, my question to you is, 

will you please maintain this commitment in FYI3'! 

Answer: The National Diabetes Prevention Program (National DPr) is a public-private 

partnership of community organizations. private insurers, employers. health care organizations. 

and gOlernment agencies working collectively to deliver. scale up. and sustain evidence-based 

lil'cstyle change interventions to prevent type 2 diabetes. In FY 2012. $10 million I"om the 

Prevention and Public Ilcalth Fund will support the National 01'1'. With this funding. CDC is 

vvorking to expand the reach of the program by providing awards to non-profit organizations. 

for-profit organin1tions. Indian/Native American Tribal Governments. and raith-based 

orgallizations. 

The FY 2013 Budget includes an increase of S 129 million above FY 2012 for the Coordinated 

Chronic Disease Prevention and Health Promotion Program to consolidate disease-specific 

chronic disease funding into a comprehensive program to address the leading chronic disease 

causes of death and disability. including diabetes, heart disease and stroke. obesity, arthritis and 

the primary preventable causes of cancer. tobacco usc. poor nutrition and physical inactivity. 

Because many inter-related chronic diseases and conditions share common risk factors. this 

program will improve health outcomes by coordinating interventions that benefit multiple 

chronic diseases. including diabetes. ;\s a result. the pwgram will gain efficiencies in crosscutting areas such as epidemiology and surveillance. supporting healthful behaviors and chronic 

disease self~ management. and improving effective delivery of clinical and other preventive 

services. 

In addition to supporting awards to state. tribal. and territorial health departments to build and 

strengthen health department capacity and expertise to effectively prevent chronic disease and 

promote health. competitive awards will be made to national organizations, national networks. 

and other entities to disscminate best practices and effectivc interventions like the National 

DPP. 

2. In his 2009 mcmo on Transparency and Open Government Presidcnt Obama states he is 

"committed to crcating an unprecedented level of openness ill Government. We will work 

together to cnsure the public trust and establish a system of transparency, public 

participation, and collaboration."] 

In his 2011 SOl) address, President Obama made the following statement " ... In the coming 

YCllr, we will also work to rc build people's faith in the institution of government. Because 

I ]O()9 {J/\\videnria! \/el1/0 on Tramparen(l'-

bJJjl~_~~llj1~119_~I"e.gU\ the press oflicc J:nl!lilhlfS'11.~ .. 1-'ill~QJ.2ruEQ~rnmcm 

20 
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77557.034

you deserve to know exactly how and where your tax dollars are being spent, you will be 

able to go to a website and get that information for the very first time in history."z 

The FY 2012 Appropriutions bill, signed by the President on December 23, 2011, included II 

provision (Sec 220) that kept this promise. 

The bill required HHS to post on II public wehsite how the billions of dollars from the 

Prevention and Public Health Fund (PPHF) arc heing spent. ("Section 220 (a) The 

Secretary shall establish a publicly accessible website to provide information regarding the 

uscs of funds made available umicr section 4002 of Puhlic Law III - 148."1 

Yet, alarmingly, the President's FY 2013 Budget proposes to eliminate this reporting 

requil'ement for the Prevention and Puhlic Health Fund. His proposal would removc 

Section 220 in its entirety. Secretary Scbclius, how docs eliminating the public reporting 

website fulfill the President's commitment to transparency'? In my mind, it does jnst the 

opposite. 

Answer: The FY 2012 enacted appropriations bill (Section 220) specifics various reporting 

requirements for activities funded with resources from the Prevention and Public Health Fund. 

Administrations, often as a matter of principle. do not seek to tell the Congress on what issues 

the Executive Branch should be required to report to Congress. Consistent v,ith that general 

principle. the Administration did not include this requirement in the FY 2013 President's 

Budget. However, the Department takes transparency very seriously. and HilS developed a web 

page which rdlects information requested in statute. The site reflccts inflmnation on the funds 

transferred to various agencies as well as funding solicitations as they become available. 

3. Recently, there has been a lot of coverage in the news about prescription pain medication 

and abuse, even fraud. In fact, in 2011, the \Vhite House released a document entitled: 

"Epidemic: Responding to America's Prescription Drug Crisis" which highlighted the 

increase in opioid lise and recognized the need fOI' increased efforts to educate physicians 

and patients to control the over-prescription and abuse of these drugs. 

a. So can you tell me why, with such a focus on limiting the use of narcotic pain 

killel's, that the Center's for Medicare and Medicaid Services (CMS) has initiated a 

coverage review to possibly limit access to a cost-effective, non-invasive alternative 

for pain treatment for Medicare patients called TENS or Transcutancous Electrical 

Nerve Stimnlation'? 

Answer: CMS recognizes the burden of chronic pain and the importance of supporting pain 

management strategies that are founded on scientific evidence. Following the publication of a 

rcport by the American Academy of Neurology in 20 I 0, which found that TENS was ineffective 

for chronic lower back pain. we helieved it was important to open a national coverage analysis to 

revicw the available evidence. 

, 

- :YO 11 S'/u/c o//he L'nion. Iddres\' 

bJL1l;.~~!~~~~:0:JJjt~h~~lti~~~f'-=12"r.css~Q.nJ~('/ 20 I ULL1_~_n;:Jllm:h£.:J1rc;;tdel11:~~t~lk-tl.!lion-~~(htrcss 

21 
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77557.035

J\ description orthe proposed review was posted on the eMS coverage website on September 

13.20 II. as the tirst step in the national coverage determination process. Public commcnts were 

invited on the review pmposal for a 30 day period and 359 cOlllments were received. We are 

continuing to review the comments received and will move forward with the coverage 

determination process in the future. 

h. This therapy has been available to Medicare patients for decades and has even 

been suppOJ·ted by CMS th,·u a National Coverage Determination in 1995. TENS is 

available to all federal employees through the government health plans, to Veterans 

thru the VA and Tricare, and to most Americans thru their private health 

insurance. So tell me, how do I explain to seniors. when almost everyone else has 

access to this therapy that they may not'? 

Answer: eMS continues to review the comments received and will determine if any changes in 

current coverage are necessary, 

i'l"ledicaf Loss Ratio Rebates: 

4. Why is it necessary to send out notices to those NOT getting a rebate? 

a. By your own accounting, that one notification to those NOT receiving a rehatc 

will add $71 million/year to the cost of health insurance. How does this assure 

value"? 

Answer: Whether or not a person is receiving a rehate. MLR notices will help ensure greater 

transparency for consumers regarding how their premium dollat·s arc used. educate consumers 

about the MLR standards. and providc an incentive for issucrs to maximize the percentagc of 

premium dollars they spend on health care and activities that improve health care quality. The 

Department solicited comment on this issue in the December 7. 20 II interim final rule with 

public comment period and expects to issue additional rules in the ncar future. 

h. Is there any provision of law that would suggest that MLR rebates need to be 

accompanied by federally-prescribed letter that sounds more like PPACA 

promotional materials? 

Answer: I-illS \\orked with the National Association of Insurance Commissioners (NAIC) to 

develop rvlLR notice requirements. Use of a standard template will ensure that all consumcrs 

receive the samc information in clear. easy to under"stand language. Since many consumers may 

not be familiar with the MLR standards implcmented through the Affordable Care Act. thc 

noticcs will help them understand MLR and the rcbate requirements. and why they mayor may 

nntt'cccivc a rebate. MLR notices vvill help ensure greater transparcncy for consumers regarding 

hO\\ their premium dollars are used. promote informed decision-making in the purchase of health 

insurance and provide an incentive for issuers to maximize the percentage of premium dollars 

they spend on hcalth care and activities that improve health care quality, 

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77557.036

5. Each Letter spells out how much can he spent on administrative costs such as "salaries 

and advertising." 

a. Why didn't you choose to highlight costs such as "combating fraud, developing 

and ensuring a high-quality pnlYidcl' network, and operating consumer call 

centers'!" 

Answer: Each model rebate notice uses examples to describe types of expenses most familiar to 

consumers, sueh as medical claims, activities that impl'Ove health care quality. and administrative 

costs, Since the MLR regulations allow issuers to classify fraud recovery activities up to the 

amount offi'audulent claims recovered as quality impl'Oving activities. it would not be accurate 

to highlight combating fraud as an administrative expense only, 

h. If 80 or 85 perfect of all premium dollars must be given directly to providers, do 

you know what percentage providers I'eceive goes toward costs such as "salaries and 

advertising?" 

Answer: The mcdicalloss ratio applies to licensed health insurance issuers in the individual and 

group markets. and rcquires such issuers to spend 80 to 85 perccnt of premium dollars on 

medical care and quality improvement activities, This provision does not apply to providers. 

i. Is it reasonable to expect that patients also "get yalue for [theirJ health care 

dollars" when visiting a provider'? 

Answer: The Affordable Cure Act puts American consumers hack in charge of their health 

coverage and care, By increasing the value of the health coverage. through provisions such as 

the medical loss ratio. elimination of lifdime limits. and !i'ee preventive services, the Affordable 

Care Act is shi fling the burden of paying for provider visits to insurance companies instead of 

the patient's pocketbook, 

The health reform law also equips consumers with new tools to help them select high-quality and 

cfticient providcrs, including adding new quality measures to Hospital Compare and adding new 

categories of providers. including long-term care facilities. to that transparency tool. Conslimers 

can 110\\ go online and sec which providers in their communities provide the highest quality and 

the bcst value. 

Thc AfI,miable Care Act also includes a large number of provisions that will improve health carc 

quality and cftlcieney and provide greater value for every patient. These include several 

provisions that link a portion of payments to the quality of health care provided, alloV'.ing 

~1cdicarc to PU) hospitals for the first time based on the quality of care they deliver. the 

Medicare Sharcd Savings Program. the many new models from the CMS Innovation Centcr. and 

othc['s, Thousands of providers around thc country are already participating in these ne\\ 

payment models and quality improvement initiatives and their patients arc getting to spend more 

time with thcir doctors and arc experiencing morc coordinated. high-value care, 

23 
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77557.037

ii. How docs this law assure that providers are delivering the care for which 

patients are being billed? 

Answer: The Affordable Care Act has improved the availability. affordability. and 

accountability or private insurancc. To continue the goal of supporting and improving the private 

health insurance market. we have steadily worked towards establishing the Affordable Insurance 

Exchanges. Beginning in 2014. the Exchanges will provide improved access to insurance 

coverage choices for an estimated 20 million Americans by 2016. Individuals will be able to 

access qualilled health plan insurance options through the Exchange market. including when 

they do not receive insurance through their employers. arc selt:employed. or are currently 

unemployed. 

c. How does the average rebate compare to the new tax on those purchasing 

insurance that starts in 2014? 

Answer: The Department estimated that in 20 II rebates (in all markets) would range from $587 

million (low) to $1.456 billion (high). The mid-point estimate was $868 million. In addition. up 

to') million Americans could receive rebates. The implementation of new laxes on insurance is 

outside of my Department's purview and is being il1lplemented by the Department ofTreasllt'y. 

COl/science Protections & Religiolls Freedom 

6. On February 10,2012, HIlS issued guidance on a "temporary safe harbor" or one year 

delay in implementation for religious entities that are opposed to providing certain 

coverage. lJndcr this delay I understand some employers arc exempt from the 

contraceptive and sterilization mandate for one year. 1)lease answer the following qnestions 

regarding the delay in implementation. 

u. Two weeks ago at the Oversight and Government Reform Committee, Dr. Laura 

Champion, Medical Director for Calvin College testified about Calvin College's 

health plan. She said, "Contraception is not controversial at our school. Clinicians 

'Hill' presc.-iptions that include contl'aception fOI' a variety of reasons, including the 

prevention of pregnancy. However, abortifacient agents arc not prescribed, nor an' 

they covered in onr health care plan." She specified that Calvin College does not 

cover Plan B or ella. The gnidance issued by your depal'tmcnt on February 10,201 2 

indicates that the one year dclay is available to non-profit institutions that have not 

provided contraceptive coverage "at any point" after Fehrnary 10,2012. 

I understand the gnidance issued by your department has cansed some confusion liS 

to whether institutions such as Calvin College will qualify for the one year delay. 

Please clcar up this confusion. Will religious institutions that oppose the morning 

after pill, but provide other contraceptives qualify for the delay in the mandate'! 

b. Would a religions small business pel'son who provides health insurance to tlH~ir 

employees also be eligihle for the "safe harhor?" 

c. Would individnals be eligihle for the "safe harhor'!" 

24 
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77557.038

d. Does the "safe harbor" only apply to non-profits if tht,y oppose the mandate on 

religious grounds? 

e. Would a non-profit that opposes the mandated coverage for a drug like, ella, on 

the moral grounds not directly associated with their religious beliefs be protected 

under the "safe harbor'!" 

Answer: On February 10.2012. we issued regulations finalizing lust summer's interim final 

regulations on the exemption from the contraceptive coverage requiremcnt for churches and 

similar organizations. The Fedcral Register publication also discusses the one-year enforcement 

safe harbor. which is detailed in separate guidance fhml the Departments. It also describes our 

intcnt to initiate a ruleillaking to require insurers to of Tel' objecting non-profIt religious 

cmployers plans without coverage for contraceptive services and simultaneously offer the 

employer's plan participants contraceptive coverage (with no co-pay) at no additional cost. It 

further indicates our intent to establish a silllilar policy with respect to self~insured group health 

plans. 

There are some religious organizations that would not be covered by the religious employer 

exemption and that do not currently cover contraceptives (all or some) due to religious objection. 

Several such organizations submitted COlllments cxpressing concern about adjusting their plans 

to cover contraceptives and suggested they might simply cease ofTering insurance coverage. The 

enforcement sare harbor. during which additional rulemaking will yield additional 

accol11111odations [(11' such organizations. responds to these particular conccrns. While the 

cn[(lrCement sale harbor is in place. the Administration will continue to work v,ith faith based 

organizations. insurers. and other interested parties to develop rules that respect religious liberty 

and ensure access to prevcntive services fiJr women. 

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77557.039

The Honorable Cathy McMorris-Rodgers 

I. Down syndrome is a non-terminal, lion-treatable condition. Prenatal testing simply 

identifics the fetus as having [)own syndrome, but does not prevent Down syndrome or 

allow for treatment prenatally. As the current recommendations are part of pl'eventative 

services, please tellmc how prenatal testing prevents Down syndrome? 

Answer: Prenatal testing does not prevent Down syndrome. Babies born to mothers who 

received no prenatal care arc three times more likely to be born at low birth weight. and five 

times more likely to die. than those whose mothers received prenatal care. Because of the 

/\(fordable Care Act. prenatal carc. including preventive services such as folic acid supplements. 

gestational diabetes screening. and breastfeeding counseling, are covered without cost-sharing in 

most health plans. These services will help ensure women and their babies are healthy. We 

cncournge \\omcn to speak with their care providers regarding the appropriate services. 

2. Studies have concluded that the current administration of prenatal testing does not 

I·estllt in informed decisions being made, This is due to physicians lacking tmining on the 

testing itself and on counseling patients; an insufficient numher of genetic counselors to 

counsel patients; inaccurate, outdated, and negative information being provided to 

patients; and all options following a diagnosis, notably adoption, not being discussed with 

patients. Moreovcr, snrveys and professiOlHlI guidelines recognize the referral to parent 

support organizations is vcry helpful. Since 2008, the Prenatally and Postnatally Diagnosed 

Conditions Awareness Act, commonly referred to as Kennedy Brownback, after its two 

lead spollsors in the Senate, has been thc law of the land. The Act recognizes a need for 

accurate information about prenatal testing, the tested for condition, and support for 

parcnt support organizations. How docs HilS' rcgulation rcquil'c thcsc informational 

resourccs to be made available together with the prenatal testing'? 

Answer: The Cuiddines recommend a well-woman preventive care visit for women to obtain 

the I\~c()mmended preventive services that arc age and developmentally appropriate, including 

prcconception and prenatal care. We encourage women to speak with their care providers 

regarding the appropriate services. We look forward to continuing to work with you to ensure 

accurate information is available regarding this and other important health isslles. 

3. It is our understanding that not all FSMA rules have heell issued. Some are at OlYlB and 

somc arc still heing developed at FDA. In the FY 2013 Budget Request, FDA pmposes 

approximately 1,200 additional FTEs, depcnding on if you count the 180 reimbursable, 

I'F:PFAR, and {DDA FTEs, Many of these proposed new FTEs al'e to assist in the writing 

of FSMA rulemaking and guidance and will be paid for through user fees. I have two 

questions regarding these FTEs: 

lI. On Friday, February 17, in an interview with Food Chemical News (Part I 

published February 24), Michael Taylor, FDA's deputy commissioner for foods 

stated, "I think with current resources we can continue thc rulcmaking process. \Vc 

can get the regulations 011 the bool{s." If that is the case, why are you requesting to 

tax the food industry to pay fOl' these additional FTEs'! 

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77557.040

Answer: In the 2013 President's Budget. FDA's request includes user fec revenue for 42 FTEs 

to support the development of FDA Food Safety Modernization Act (FSMA) regulations and 

guidances. While FDA can develop the regulations mandated by FSMA with its current 

\vorkf"ot"Cc. this only entails writing and tinalizing the regulations. It does not include their 

implementation. including the significant number of guidance documents. model plans. and other 

outreach materials that will need to be drafted to implement the preventive contwls rule and 

assist industt·y with implementation. 

Rcgarding the pwposed registration fee. FDA is having discllssions with the food industry and 

other t(lOd safety stakeholders to determine what type of fee structure could be implemented 

that could get broad support within the food industry. other stakeholders. and Congress. As 

FDA intends fot·the user fee to SUppOt1 {(lod safety activities that provide benetit to the industry 

paying the fee. it would be considered a "user fee" rather than a "tax." 

These fees will allow FDA to reduce the risk of illncss associated with food and feed. decrease 

the frequcncy and severity of food- and feed-borne illness outbreaks. reduce instances of 

contamination. and greatly diminish the burden on American businesses and the U.S. economy 

due to Illodborne illness events. Without sufficient and reliable fee revenue. we ean expect the 

unacceptably high human 1011 of f()odborne illness to continue. with the resulting disruptions to 

the I(locl system and the economic burdens to the food industry that result from food borne illness 

outbreaks. 

These proposed USCI' fee investments arc quite modest compared to the economic value oCthe 

nation's food and feed supplies and the eosts that the public. industry. government. and the 

health care system experience during an outbreak 

b. If you do increase size of FDA in this manner, what are you going to do with these 

additional employees after the rulemaking and guidance process is complete'? 

Would you then reduce the number of additional employees and the user fees 

paying for them'? If the four most significant pl"Oposcd rnles are already at OMB, 

haven't you already completed the most labor-intensive part of the process'? 

Answer: Implemcnting the new preventive controls framework that will be estilblished with the 

FSMA-mandatcd regulations will take new resources now and into the future. The development 

(l['tlle regulations isjust the start ofa process which includes developing signilicant numbers of 

cOl11modity-spcci lie guidance documents. model plans. and other outreach materials to assist 

industry with implementation. We will also need to train our inspectors and support them in 

implementing the new preventive controls framcwork. The subject matter experts who help 

develop the regulations and guidance will serve as a resource for implementation for both FDA 

and stakeholders . 

. " Our office has received many constituent communications in opposition to a specific 

section of the Medicare Physician Fee Schedule Final Rule which went into effect on 

January 1,2012. A good number ofcollstituent radiologists have opposed the inclusion ofa 

25 percent multiple procedure payment reduction (MPPR) to the professional component 

27 
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77557.041

of certain advanced diagnostic imaging services interpreted by the same physician, on the 

same patient, during the same session. A rcccnt stndy pnblished in the Journal of the 

American College of Radiology determined that any efficiencies that exist in the 

professional component of advanced diagnostic imaging arc in the 3-5% range. Are you 

aware of CMS conducting any statistical or data analysis that justifies the ultimate decision 

to apply a 25% MPPR on the professional component'? If so, wonld yon be willing to share 

the specific data set that was used in support of the MPPR'? 

Answer: CMS adopted this policy based on sound data analysis; this analysis showed that there 

is duplication and efliciencies in physician work when multiple images are taken in the same 

session. While CMS acknowledged that efficiencies may vary across code pairs, the analysis 

demonstrated that a 25 percent reduction in the professional componcnt is reasonable. The data 

even suggest that the efficiencies may be higher than the 25 percent reduction policy tilat was 

adopted. This is further affirmcd by the comments the Medicare Payment Advisory COJllmission 

(McdPAC) submitted on the CY 2012 Physician Fcc Schedule proposed rule, in which they 

supportcd the originally proposed ('eduction of 50 percent to the professional component. 

eMS has also seen a trend that Medicare spending for imaging services paid under the physician 

fce schedule has grown dramatically over the past dccade due to an increase in the number and 

intensity of these services, MedPAC has stated that this volume growth may signal that thesc 

services arc mispriced, 

Further CMS descrihed the data that we used and included a description of our methodology in 

the Calendar Year (CY) ::'012 Physician Fec Schedule final rule. Additionally, in December 

2011 (subsequent to publication of the final rule) CMS Jllet with industry representatives to 

further dcscrihe our methodology. 

5. As you may know, the Washington Legislature is considering a bill, HH 2330, to mandate 

ahortion coverage in all health insurance plans. According to the bill, any health plan that 

provides coverage for maternity care or services must also provide abortion coverage. If 

enactcd this mandate would appear to violate the Hyde-Weldon conscience clause, which 

states that no Labor-HBS appropriations funds may be made available to a state that 

discriminates against a health insnrance plan for refusing to provide, pay fOl', provide 

co"erage of, ()I' refer for abortiolls. There is the real concern that this law would put the 

state in scl'ious jeopardy of losing all federal assistance appropriated under tbe L-HHS bill. 

As a result of those concerns a provision was added indicating that the bill would not go 

into effect if it would result in noncompliance with the Hyde-\'Veldoll amendment. It would 

hc extremely helpful, if you would provide clear guidance to the State on this matter. 

Would you clarify the following: 

a. Would HB 2330, if enacted, violate the Hyde-Weldon amcndment'? 

b. Would L-IIHS funds be withheld from the state of Washington if this bill were 

enacted"? 

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77557.042

Answer: As a fonner Governor. I am very respectful of the state legislative process. and I 

decline to take a position on state legislation 

6. States are facing a "squeeze" from both federal and local govcrnml'nts and Medicaid 

costs a,'e forcing states to make tough policy choices. According to the National Association 

of State Budget Officers, increasing federal mandates arc forcing states to spcnd mOl'C on 

Mcdicaid than K-12 and higher cducation and public safety. 

Do you believe the President's budget, which forces nearly S60 billion onto states without 

any additionaillexibility, is appropriate dul'ing this tough time for states? 

Answer: State fiscal situations are beginning to turn around. and the Administration is optimistic 

that steps we have taken toward economic recovery will result in substantial further 

improvement by FY 2015 when states will also receive significant bcnclits from covering the 

Medicaid expansion population in the fonn ofrcduced costs fl)r uncompensated care and 

improved health outcomes. 

In addition. forthe tirst three years of the Medicaid expansion (CY 2014-2(16). States will 

receive 100 percent FMAP for expenditures rcluted to the newly eligible adult population. After 

that. the Federal government will continue to fund at least 90 percent of the cost of the nev\l: 

eligible population. States that had expanded Medicaid eligibility levels prior to the Affordable 

Carc Act also vvill receive significant Federal support beginning in 2014. 

7. The President has called on states to focus greater investment on education, yet Medicaid 

is increasingly consuming a significant portion of state budgets. Under the Maintenance of 

Effort, states llI'e limited in what changes they can make to their program to ensure only 

the truly eligible actually receive benefits for the program. As a former Governor, I am 

sure you understand the importance of giving states maximum flexibility to balance their 

budgets while promoting key initiatives such as K-12 education. 

a. Are you concerned that states do not have the flexibility they need to halance 

\ledicaid spending with education priol"itics in their state? 

Answer: There are a number of steps States can take to reduce costs and squeeze waste. fI'aud 

and abuse from their programs. States have many choices they can make including limits on 

sOllle benefits. changes in cost-sharing. and greater use of managed carc. 

Medicaid cost issues largely reflect the cost issues facing our health care system as a whole. 

Like other payers. States can save considerable dollars by focusing on improving the safety and 

quality of care. "ITorts to reduce and eliminate unnecessary hospital readmissions arc a great 

example. Preventing one hospital readmission of a disabled adult with Medicaid can save 

enough mone) to cover three adults without disabilities for an entire year. 

b. Moreoyer, how do you expect states to handle existing Medicaid costs with the 

added hill ions that will come Oil their tab after 2014'! 

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77557.043

Answer: The Affordable Care Act asks that all sectors of the nation come together to contribute 

to the shared goal of reducing the uninsured and improving health care. As part of that initiative. 

the Medicaid program is expanded to cover individuals with incomes at or below 133 percent of 

the Federal poverty level. Congress recognized that this critical new step could not be 

accomplished without Federal support. Therefore. the Affordable Care Act provides substantial 

linancial support i()!' States to help them accomplish the task. For the first three years of the 

expansion (CY 2014-2(16). Statcs "ill receive 100 percent FMAP for expenditures related to the 

newly eligible adult population. After that. the Federal government will continue to fund at least 

<)0 percent of the cost of the newly eligible population. States that had expanded Medicaid 

eligibility levels prior to the Affordable Care Act also will receive significant Federal support 

beginning in 2014. 

At the same time. States will also receive significant bendit from covering this new population 

in the I(mn of reduced costs t(lr uncompensated care and improved health outcomes. 

8. States, such as Washington, are faced with a situation in which they are being asked to 

move fonvard with implementation of exchanges. Y ct. there is a lack of guidance at the 

fcderallevel as to what is expected of states at this point and what impact the Supreme 

Conrt's decision will have. In fact, I'vc been contacted on multiple occasions by legislators 

in WA State with I'egard to implementing an exchange because of the lack of information 

at HilS. Moreover, it is our understanding that many states have decided to wait until the 

Suprcme COUI·t niles to movc fonnlrd on an exchange. \Vhat advice is nns giving to 

states? 

Answer: As we proceed through implementation. I-IHS is aware that dilTercnt states arc 

operating on dirferent timeirames. We arc working hard to linalize existing proposed rules and 

release guidance and other information about HHS's operational procedures and intended 

approach to a variety of topics so that states and stakeholders have an understanding of future 

opportunities and potential obligations. 

We expect to finalize the series of proposed rules related to Exchange establishmcnt. premium 

stabilization policies and Medicaid eligibility in the near illtme. In addition. I would like to point 

Ollt that in December. litiS I'eleased a bulletin on our intended approach to defining essential 

health bcnelits and just recently we released a bulletin regarding our intended approach to 

implcmenting the ;\ctuarial Value and reduced cost-sharing provisions of the law. We stand 

ready to assist all states. regardless of \\ here they arc in the Exchange developmcnt process. 

30 
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77557.044

The Honorable Leonard Lance 

IIJediclIre Advantage Program and Qualih' Demonstratioll 

1, The Administration has touted the success of the Medicare Advantage program over the 

last several months, claiming credit for increased enrollment and lower premiums on 

average, as well as for higher quality plan options. The Administration has also claimed 

that concerns about the cuts to Medicare Advantage plans in the PPACA were overhlown 

or inaccurate as evidenc{'d by continued participation of plans in the program and the 

aforementioned enrollment and premium numbers. 

a. Please state which payment changes mandated by the 1'1' ACA for the Medicare 

Advantage program have been implemented, what phase are they in and when will 

full implemenilltion occur. 

Answer: Currently. CMS has implemented all the payment changes mandated by the Affordable 

Carc Act for the Medicare Advantage (MA) program according to the lime frames required by the 

law. CMS provided detailed intl1rlllation ahoul these enacted MA payment changes in the 20 II 

Rate Announcel11ent. 2012 Advance Notice. 2012 Rate Announcement. 2013 Advance Notice 

and 2013 Rate Announcement. They arc availahle on the CMS website at: 

b,Up:!!\\ II \\ .cll1s.>!()v/'v1cd icarcillcalth-I'I'lIl,;;tvlcdicarc AdvtgSpccRatcStats/ Announcements-andI )octll11cnb.ilt11l1 

('lvlS \vill continue to post futurc MA plan payment information to its website annually each 

February (Advance Notice) and April (Rate Announcement). 

The i\fIl1rdable Carc Act made the following changes to provisions in title XVIII of the Social 

Security ;\ct that impact payment to MA Organizations: 

Section 3201 3 

.Hodilicd Benchmarks 

This section froze Medicare Advantage (MA) benchmarks in 20 II. 

Beginning in 2012. MA county-level benchmarks arc to be set on a sliding scale using 

quartile rankings based on currcnt average fee-for-scrvice (ITS) costs in an area. The 

new benchmarks are being phased in on a two. tour. or six year schedule beginning in 

2012 (fully phased in for all counties in 2(17). 

o The specific quartiles are: 25 percent of COlin ties with highcst level of per-capita 

FFS spending have benchmarks set at 95 percent of FFS, second quartile 

belKhmarks set at 100 percent of FFS, third quartile hcnchmarks set at 107.5 

pacent of ITS. and fourth quartile benchmarks set at 115 percent of FFS. 

o The modified benchmarks are capped at the applicable amount. 

o This provision llses two alternative phase-in schedules: I) Four ycar phase-in 

beginning in 2012 and completed in 2015 which targets areas with benchmark 

, rhe Sellate bill version ofseetion3201 was repealed and replaced hy Section 1102 ofHCERA. We describe the 

lina! version here. 

31 
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77557.045

changes of at least $30. but less than $50; and 2) Six ycar phase-in beginning in 

2012 and completed in 2017 \\hich targets areas with benchmark changes or at 

least $50. The provision continues to phase out indirect medical education (lME) 

paymcnts to MA plans and excmpts PACE plans from this new payment 

methodology. 

QualilY Bonus l'aymen!s; Application o/Incrcase/ilr Loll' (Jnd New };nrollmenl Plans 

This provision provides for quality based payment adjustments for plans having 4 stars or more 

under a 5-star rating system. beginning in plan year 2012. For qualifying plans (those with 4+ 

stars) in qualifying counties (generally counties with low FFS costs and MA penetration ratcs 

exceeding 2S percent) those plans arc eligible for double bonus payments. 

eMS implemcnted lInal regulations in C1\1S-4144-F in accordance "ith this bonus system. 

I-Iowcver. under the authority of Section 402(a)( I )(A) of the 1967 Social Security Amendments 

(as amended). CMS is currently conducting a demonstration to test an alternative method for 

computing quality honus payments (QBPs) for plan years 2012 through 2014. 

For plan year 2012. low enrollment plans at·e deemed uncler the Aff(miahlc Care Aet to he a 

qualifying plan. For suhsequent years. the Secretary is to develop a quality star rating system for 

itm enrollment plans. New plans meeting criteria specitied by the Secretary arc to he treated as 

a qualifying plan and receive the following percentage increase to their benchmark: 2012. 1.5 

perccnt; 2013. 2.5 percent; and 2014 and subsequent years. 3.5 percent. 

HCERA 1102 

Repeals !he Comparative Cosl Adjustment Program 

This provision also repeals the comparative cost adjustment program established by the MMA. 

Sec. 3202" 

Belle/it Prolection and Simplification and adjllslmenls to reba!e pen'enlages 

Beginning with plan year 20 II. MA plans may not impose cost shilring charges on bencliciaries 

for certain services that are greater than what is charged under Original Medicare. These 

scryices include chemotherapy. renal dialysis. skilled nursing care. and other services as 

determined by the Secretary. 

Beginning with plan year 20 12. bencficiary rebate amounts (based on the di [Terence between the 

plan bid and the benchmark amount for the county) arc to be determined using a phased-in 

appl"Oach (fully in place for plan year 2(14) that reduces the amount or rebates available ti.)!" 

premium reductions or additional benefIts depending on the plan·s quality rating based on CMS· 

live star rating system. Previously. 75% of the difference between the plan bid and the 

benchmark (i f the bid is lowe[·) was to be paid in rebates. Under section 3202. plans with a 

quality rating of at least 4.5 stars would receive a rebate perccntage of 70; plans with a quality 

rating of at least 3.5 stars and less than 4.5 stars would receive a rebate percentage of65; and 

plans \I ith a quality rating of less than 3.5 stars would receive a rebate percentage of 50. For 

I A, "mended by See[ion II 02(d) ofllCERA 

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77557.046

2012. low enrollmeJ1l plans shall be treated as hay ing a star rating of 4.5 stars. For 2012 and 

subsequent years. new :Y1A plans would be treated as having a star rating of 3.5 stars. 

Sec. 3203' 

,/ppIiWlion oj"('oding Inlemily Adillslmcnl During MA Payment Transition 

This provision extends indefinitely (ahsent certain steps to ensure against coding diHcrences) the 

explicit statutory requirement that CMS conduct analysis of the differences in coding patterns 

between thc ITS and MA programs. and adjust MA plan payments on an annual basis. 

l3eginning in plan year 2019 and subsequent plan years. the adjustment shall be no less than 5.7 

perccnt. In calculating each year's adjustment. the adjustment factor for 2014 shall not be less 

than the adjustment factol' applied for 20 I O. plus 1.3 percentage points (4.71 percent total). For 

plan years 2015 to 2018. the adjustmcnt factor shall not be less than the adjustment factor 

applied COl' the previoLis year. plus a .25 percentage point increase. 

Sec. 3205 

f:~\lensi()f7ji)f' Specialized MA Plansfilr Si)ecial Needs Indil'idllals 

Beginning in plan year 20 II, improves payment accuracy for new SNP enrollees and individuals 

\\ ith multiple co-morbid chronic health conditions, and. for certain S"lPs. allows the Secretary to 

adjust payment for costs associated with caring ft)r frail populations \\ho are similar to those in 

the PACT. program. 

h. What are the lUIS actuary's estimates of Medicare Advantage enrollment after 

full implementation of PPACA? 

Answer: On February 10. 201 J. the CMS Chief Actuary in his testimony before the 1 louse 

COlllmittee on Ways and Means reported that the estimated effect of A /'fordable Care Act 

changes on Medicare Advantage payment would reduce enrollment by about 50% in 2017, once 

fully phased in. Specific enrollment estimates are provided in the President's FY 2013 Budget. 

I am happy to report that these predictions about reduction in enrollmcnt have not come true and 

in fact the MA program remains stronger than ever. Today. on average there are 26 :vIA plans to 

choose li'om in nearly every county across the country. Access to MA remains strong with 99.7 

percent of Medicare beneficiaries enjoying access to a MA plan. Since 2010 when the 

Alfordahle Care Act was passed. MA premiul1ls on average have fallen 16 percent and 

enrollment has clil1lbed by 17 percent to over 12.8 l1lillion beneficiaries. 

c. Please describe the PI' ACA quality honus program whereby 4 and 5 star plans 

would receive additional honus payment? Has this bonus prognlm heen ahle to 

mitigate current plan payment changes as well as provide an incentive fOl' plans to 

imp.·ovc their quality rankings, ill part in order to receive the bonus? 

, Repealed and replaced by Section 1102 of 1 !CERA 

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Answer: The Affordable Care Act 01'2010 provides tllr Quality Bonus Payments (QBPs) to MA 

plans that achieve at least fllur stars in a five-star quality rating system. The Affordable Care Act 

alsll changes the share of savings that :ViA plans must provide to enrollees as the beneficiary 

rcbate. mandating that the level of rebate is tied to the level ofa plan's star quality rating. These 

QIW ratings. beginning in 2012. directly affect the monthly payment amount MA organizations 

receive tI'om CMS. 

In addition to the Affordable Care Act QBPs. eMS is currently conducting a demonstration 

using authority of Section 402(al( I )(A) of the 1967 Social Security Amendmcnts (as amended). 

to test an alternative method for computing QBl's for plan years 2012 through 2014. As pan of 

the evaluation and analysis of the current Quality Bonus Demonstration program. CMS intends 

to determine the impact on quality improvement by comparing MA plans' performance \~ith that 

of non-\;IA plans. The evaluation of plan performance improvement will inform how best to 

structure the MA program fllr the long term. 

d. With statutory bonus payment in place, why did the Department use 

demonstration authority under Section 402 of the Social Security Act to add over 88 

hillion into Medicare Advantage plan payments - awarding these honus payments to 

3 star plans and expanding the scope/amount of the honuses to all plans? Please 

explain your response to the GAO's questions about whether this can be truly 

considered a "demonstration" program, given that it is heing implemented 

nationwide and is therefore not testing any real policy change, and evcn if 

successful, will not hc allowed to continue. 

Answer: Building on the quality bonus payment provisions in the Affordable Care Act. CMS 

developed a Quality Bonus Payment (QBP) demonstration to further test whether stronger 

financial incentives and investments in quality plans will lead to more rapid increases in quality 

among MA plans. While the Amlrdable Care Act methodology provided fll!' a new bonus 

payment to be awarded if a MA plan rating improved from 3 stars to 4 stal's in 2012 and 

thcrealier. under the current nationwide demonstration. there arc financial incentives tor 1\1A 

plans to improve from 2 to 3 stars. from 3 to 4 stars. and from 4 to 5 stars. With respect to the 

early years of the demonstration. this approach provides investments in plans that have quality 

ratings across a broader spectrum. as they have pmven their ability to use resources effectively. 

and could be expected to improve quality more effectively. These incentives encourage. and the 

investments enable. quality improvement for a larger number of plans. positively affecting a 

larger number of beneficiaries. This demonstration is based on the premise that improved 

quality results in improved health outcomes. and thus savings over time tI'om more effective and 

ef'licient delivery of needed health care. 

Section -102 of the Social Security Amendments of 1967.42 U .S.c. 1395b-l. is the authority tor 

this Medicare pa: mcnt demonstration. Subsection 1395b-1 (al( I )(A) authorizes HHS to develop 

and engage in "cxperiments and demonstration projects" to determine whether changes in 

mcthods of payment or reimbursement would increase the "efficiency and economy of 

(Medicare) health sel·vices ... through the creation of additional incentives ... without adversely 

affecting the quality of such services." 

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The Department fully supports this initiative and does not agree with the GAO's findings on the 

QBP demonstration's design and evaluation or the recommendation to cancel the demonstration. 

The Department believes that the MA-Q!3P demonstration is consistcnt with the precedent 

established by other demonstration projects. For example, under the prim' Administration, CMS 

conducted several large scale demonstrations that were national in scope: 

The Medicare Demonstration to Limit Annual Changes in Part D Premiums Due to 

Beneliciary Choice of Low-Cost Plans: 

• The Medicar'e Demonstration to Revise the part D Low Income Benchmark Calculation: 

and 

e. Will an additional 512,8 hillion he spent on MA plans in 2012 alone as a result of 

this demonstration'! How much of the phased-in payment changes does this amount 

offset'? 

Answcl': The eMS Office of the Actuary (OACT) estimates the net cost of the demonstration for 

2012 to equal $2.7 billion. OACT estimates that the cost to the Medicare program to extend the 

QBPs to additional MA plans and accelerate the phase'in of Q8Ps is about $8.3 billion. In 

contrast. at the time of enactment, e80 estimated that the Affordablc Care Act's MA pay ment 

changes would reduce payments to MA plans by over $130 billion by 2019. It is important to 

note that these bonus payments allow plans to invest in quality improvement. Organizations 

receiving bonuses can take the availability of these new resources into account in submitting 

their bids for A and B benefits, while still having a margin available to provide additional 

bcnGlits to enrollees based on the difference between their bid and the higher benchmark amount 

produced by the bonuses. 

f. Please confirm whether this is the most expensive demonstration ever done by 

CMS under St'ction -102 authority - and if not, please descrihe any more expensive 

-102 demonstrations and where this one ranks, 

Answel': While the projected costs under this demonstration are higher than under previolls 

ivledicare payment demonstrations, it is possible that over the longer term. higher quality could 

lead to better treatment outcomcs and lower costs. 

g. Prior to this quality bonus delllonst.-ation project, what was the most expensive 

demonstration done by IlBS that used the Section 402 authority'? Could you 

document for this committee the history of Sectioll 402 demollstrations, their costs, 

the length of the demos, etc:! 

Answer: The Department has a history of using Section 402 authority in Medicare programs 

during the last 40 years. Demonstrations initially conducted under authority in section 402 were 

the foundation for all of the following into the 'vlediearc program: the originall1MO risk 

contracting program upon which Medicare Part C is based, Inpatient Hospital Prospective 

Payment System (PPS), Skilled Nursing Facility PI'S, Home Health PI'S, Durable Medical 

Fquipment Competitive Bidding. Medicare liMOs. Medicare Preferred Provider Organizations 

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(PPOs). and the Program of All-Inclusive Care for the Elderly (PACE). as well as the hospice 

benefit. 

Below are 1\\0 examples of demonstrations that were national in scope including the most 

expensive done under Section 402 authority prior to the MA Quality Bonus Demonstration: 

In 2007. CMS implemented the two-year demonstration. "Demonstration to Limit Annual 

Change in Part D Premiums". which affected the premiums for all Part D heneticiaries in 

all Part l) plans. Under this demonstration. CMS delayed the implementation of a 

statutory calculation used to determine beneficiary premiums and federal direct subsidy 

raymcnts. Speci tical I),. the demonstration allowed for a multi-year transition to a 

weighting methodology required by the Medicare Prescription Drug. Improvement and 

Modernization Act (MMA) that othenvise would have significantly increased Part D 

beneficiary premiums in 2007. The total cost of this demonstration was $830 million due 

to the increased federal direct subsidy payments made in 2007 and 2008. 

In 20 I O. eMS implemented a one-year "Demonstration to Revise the Part 0 Low-income 

Benchmark Calculation". This nationwide demonstration tested an alternative method for 

calculating the low-income premium subsidy amounts. The alternative method was 

successful in increasing the LIS benchmarks in regions that previously had relatively low 

premium subsidy levels. Beginning in 2011, the methodology tested under the 

demonstration vIas coditled in statute as part of the Affordable Care Act The cost of the 

demonstration was approximately $110 million due to the increased low-income 

premium subsidy amounts provided by the federal government 

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77557.050

The Honorable Bill Cassidv 

CDC Guidelines 

1. The CDC's Division of Viral Hepatitis recently released a study in the Annals (~r Internal 

Medicine that looked at the cost-effectiveness of birth-cohort screening for the Hepatitis C 

virus as compared to the current risk-based approach. There are four million Americans 

infected with HCV today and "baby boomers" account for two out of every three cases. Of 

the four million Americans infected, 75%, are unaware of their condition, which tells me 

that the risk-based approach to HCV screening is highly ineffective. I understand that the 

CDC has been working to update their screening guidelines by recommending a one-time 

screening for all Americans born between 1945 and 1965. I applaud these efforts, but there 

needs to be some UI·gency behind the release of these guidelines. The Annals study included 

some devastating statistics on the mortality rate associated with HCV. In 2007, HCV 

surpassed 1IIV/AIDS with 15,106 dcaths attributable to the virus and the Annals study 

forecasts that this number will increase to 35,000 annually by 2030. 

Secretary Scbclius, this is the time to take action. When can we expect the CDC to release 

thcse ncw draft guidelines on HCV screening'? 

Answer: The Department of llealth and 1·luman Services has. under my leadership and that of 

Dr. Howard Koh. the Assistant Secretary for Ilealth. prioritized action against viral hepatitis. To 

this end. \\C have released an action plan. '·Combating the Silent Epidemic of Viral Hepatitis: 

Action Plan for the Prevention. Care and Treatment of Viral Hepatitis:· The Action Plan calls 

I()r CDC to revise its guidelines for hepatitis C testing and linkage to care. CDC will conduct a 

thorough analysis of the epidemiology of hepatitis C to identify those populations most likely to 

be alTected. as \Vcll as a thorough review of the available evidencc on the cost and benefits of 

testing and treatment and is expected to isslle revised guidelines in the near future. 

MediCi/id Expansion 

2. CBO estimated in its :\'1arch 2011 haseline that the Medicaid program would reach $4.6 

trillion in feder·al spending over a 10-year period. Estimates show that Medicaid enrollment 

will reach 80 million people or more - signaling that one in four Americans will be on what 

was intended to he a "safety net" program for the poorest and sickest Americans. At the 

state level, Medicaid is expected to consume an increasing share of state budgets and grow 

much more rapidly than state revenue growth. In short, Medic~lid is in trouble and the 

most vulnerable people in America arc set to suffer if we cannot return the program to its 

origirllli mission, which' hclieve is to help our nation's poorest, sickest old and young. 

As' discussed during the hearing on March 1,2012 , am conccrncd about the financial 

burden this expansion places on the States. , do think that the States mllst havc more 

Ilexibility on how to implement their Medicaid pl"Ograms. I mentioncd the California state 

Medicuid program directly.' have been following Gov. Jerl-Y Brown's plan for Medi-Cal. 

Thc governor has proposed to save thc statc more than $500 million a year. The governor 

wants co-pays from recipients for emergency-room visits as well as routine trips to the 

doctor and dcntist, beginning in Octohcr·. The Ohama Administration has rejected this 

idea. 

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An independent study commissioned by the California Medical Association (CMA) found 

that 36 percent of Medi-Cal enrollees said they were unable to see a doctor because the 

provider did not participate in Medi-Cal. That is four times the number of pl'ivatelyinsured Californians who were turned down by doctors due to their insurance can'icr (9 

percent). 

Secrctary Sebelius, what is your view on the Obama administration's OK of 10'\10 acrossthe-hoard physician payment cuts in Medi-Cal, one of the poorest paying Medicaid 

programs in the nation. Are you concerned that physicians will no longer be ahle to afford 

to participate in the Medi-Cal program'! 

Answer: I am committed to ensuring access to care for \Iledicaid beneficiaries. The Affordable 

Care Act provision that helps States boost their payment rates to primary care providers for t\\O 

years (2013 and 2014) is a good first step. Thc Affordable Care Act also takes important and 

signilicant steps to boost the number of primary care providers. including bonus payments for 

pt'imary care pnKtitioners in Medicare and new residency slot allo\\ances. traineeships for nurse 

pt'actitioncr and physician assistant students. and support for public health workforce and 

development. In addition. the Affordable Cure Act makes investments in the Nationaillealth 

Service Corps. \vhich puts primary care health practitioners in areas with limitcd access to health 

care. These investments help expand the primary care workforce and meet the health carc needs 

of undet'served communities aeross the country. Combined, these A1Tordabie Care Act 

provisions help boost the supply of'hcalth care providers who treat patients across the country. 

particularly in high-need areas where many patients may havc Medicaid. 

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77557.052

The Honorable Edolphus Towlls 

My office continues to have concerns with the reported 50-90";', audited error rates being 

released by CMS' contractors. I am advised that this error ratc is a direct result of 

confusion among physicians as to the propcr paperwOl·k needed to propcrly prescribe 

PMOs 011 behalf of their patients. In fact, I regularly hear from stakeholders regarding a 

lack of clarity and consistency associated with the papen~'ork needed to properly file PMD 

claims on a beneficiaries behalf. To that end, physicians and physician associations have 

long recognized the significance of utilizing clinical templates for patient examinations. 

Likewise, several members of Congress, in an attempt to reduce the error rate, have 

specifically requested that CMS develop a standard templatc for doctors to use in 

prescribing a PMO. Although eMS has agreed to develop such a template, it has yet to be 

released. When will CMS release the P}\;10 face-to-face evaluation template that physicians 

can rely on to establish mcdical necessity and validates that the treating physician 

conducted the congressionally mandated face-to-face medical evaluation of the patient? 

Answer: eMS is in the process of developing an electronic clinical template as parl of 

provider"s electronic health rccords (EHR). An initial draft of the template is available on the 

eMS website at I1t1p:I/\\ ,\ ,\.cl11s.gov /Rcsearch-Statistics-Data-and-Svstcllls/('ol11j1utcr-Data-andSvsklm/

ES\lD'EicclronicClinicaITcmplatc.html. eMS is actively seeking input on this 

template and stakeholders can submit comments on the drall to cclinicaltcmplatc(i(cms.hl1s.go-':.. 

In addition. eMS will host a series of Open Door forums to allow suppliers to comment and 

submit feedback on the drat! template; the schedule for future ODFs ean be found on the eMS 

\\ cbsitc. 

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77557.053

Thl' Honorable Eliot Engel 

I want to thank the Administration for the recently announced Strong Start Initiative to 

improve maternal and newborn health, Recognizing that rapid gains in maternity care 

quality and outcomes are both necessary and within reach similarly led me to introduce 

H.R. 3620, the Quality Care for Moms and Babies Act at the end of last year, 

I believe that there are excellent provisions in Strong Start -- including the maternity care 

home piece which also is in m)' legislation -- that will have a significant impact on 

improving material and newborn health. 

As we all know, maternal and newborn care is the leading hospital conditions covered by 

Medicaid. However, there are many quality measurement gaps for this large vulnerable 

population that are not being covered in the Adult Medicaid and CHIP programs. I believe 

(IUality measurement offers the potential to cUl'b overuse, reliahly deliver effective care, 

and improve the value of our considerable investment in this population. 

Could ~'ou please comment on what additional administrative opportunities exist for 

developing quality measurements, including the possible adaptation of Consumer 

Assessment of Healthcal'e Providers and Systems (CAllI'S) surveys to measure the 

experiences of cbildbearing women and newborns? 

Answel-; The Initial Core Sets of'Child and Adult Medicaid Health Care Quality Measures 

contains eight measures related to matcmal and reproductive hcalth. including a measure to 

capture the postpartum care rate. \vhich serves as a complement to the mcasure in the Initial Core 

Set llfChildrcn's Health Care Quality Measures. timcliness of prenatal care (see below for listing 

ol'eight measures). Over the next year. CMS will phase in an Adult Medicaid Quality Measures 

Program to address measurement gap areas of the Initial Core Set for Medicaid-eligible Adults. 

begin t.:sting the collection of some of the measures. and focus on relining measures. where 

needed. One ofthc 26 Initial Core Health Care Quality I'vlcasurcs fcw Medicaid-eligible Adults, 

is the Consumer Assessment of Healthcare Providers and Systems (CAllI'S) Health Plan survcy 

vcrsion 4.0. including the Adult Questionnaire Supplemental Items 4.011. CMS will use the data 

li'ol11 the CAHPS survey to assess Medicaid beneliciaries' access to and experiences with care. 

The technical specilieations for these measures will bc available in fall 2012 to support States 

that seek to voluntarily collect ancl report the Initial Core Set of I kalth Care Quality Measures 

1<". Medicaid-eligible Adults. CMS also has other initiatives that relate to children's quality 

measures. including a Pediatric Quality Measures program (PQMP) launched in 20 II. to 

enhance quality measurement It)r children. 

40