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+ - DEPARTMENT OF HEALTH AND HUMAN SERVICES FISCAL YEAR 2008 BUDGET REQUEST
+
+[House Hearing, 110 Congress]
+[From the U.S. Government Publishing Office]
+
+
+
+DEPARTMENT OF HEALTH AND HUMAN SERVICES FISCAL YEAR 2008 BUDGET REQUEST
+
+=======================================================================
+
+ HEARING
+
+ before the
+
+ COMMITTEE ON THE BUDGET
+ HOUSE OF REPRESENTATIVES
+
+ ONE HUNDRED TENTH CONGRESS
+
+ FIRST SESSION
+
+ __________
+
+ HEARING HELD IN WASHINGTON, DC, FEBRUARY 13, 2007
+
+ __________
+
+ Serial No. 110-6
+
+ __________
+
+ Printed for the use of the Committee on the Budget
+
+
+ Available on the Internet:
+ http://www.gpoaccess.gov/congress/house/budget/index.html
+
+ U.S. GOVERNMENT PRINTING OFFICE
+
+33-423 PDF WASHINGTON DC: 2007
+---------------------------------------------------------------------
+For sale by the Superintendent of Documents, U.S. Government Printing
+Office Internet: bookstore.gpo.gov Phone: toll free (866)512-1800
+DC area (202)512-1800 Fax: (202) 512-2250 Mail Stop SSOP,
+Washington, DC 20402-0001
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+ COMMITTEE ON THE BUDGET
+
+ JOHN M. SPRATT, Jr., South Carolina, Chairman
+ROSA L. DeLAURO, Connecticut, PAUL RYAN, Wisconsin,
+CHET EDWARDS, Texas Ranking Minority Member
+LOIS CAPPS, California J. GRESHAM BARRETT, South Carolina
+JIM COOPER, Tennessee JO BONNER, Alabama
+THOMAS H. ALLEN, Maine SCOTT GARRETT, New Jersey
+ALLYSON Y. SCHWARTZ, Pennsylvania THADDEUS G. McCOTTER, Michigan
+MARCY KAPTUR, Ohio MARIO DIAZ-BALART, Florida
+XAVIER BECERRA, California JEB HENSARLING, Texas
+LLOYD DOGGETT, Texas DANIEL E. LUNGREN, California
+EARL BLUMENAUER, Oregon MICHAEL K. SIMPSON, Idaho
+MARION BERRY, Arkansas PATRICK T. McHENRY, North Carolina
+ALLEN BOYD, Florida CONNIE MACK, Florida
+JAMES P. McGOVERN, Massachusetts K. MICHAEL CONAWAY, Texas
+BETTY SUTTON, Ohio JOHN CAMPBELL, California
+ROBERT E. ANDREWS, New Jersey PATRICK J. TIBERI, Ohio
+ROBERT C. ``BOBBY'' SCOTT, Virginia JON C. PORTER, Nevada
+BOB ETHERIDGE, North Carolina RODNEY ALEXANDER, Louisiana
+DARLENE HOOLEY, Oregon ADRIAN SMITH, Nebraska
+BRIAN BAIRD, Washington
+DENNIS MOORE, Kansas
+TIMOTHY H. BISHOP, New York
+
+ Professional Staff
+
+ Thomas S. Kahn, Staff Director and Chief Counsel
+ James T. Bates, Minority Chief of Staff
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+ C O N T E N T S
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+ Page
+Hearing held in Washington, DC, February 13, 2007................ 1
+Statement of:
+ Hon. John M. Spratt, Jr., Chairman, House Committee on the
+ Budget..................................................... 1
+ Hon. Paul Ryan, a Representative in Congress from the State
+ of Wisconsin............................................... 3
+ Hon. Michael O. Leavitt, Secretary, U.S. Department of Health
+ and Human Services......................................... 4
+
+Prepared statements, additional submission:
+ Mr. Spratt, prepared statement of............................ 2
+ Mr. Leavitt, prepared statement of........................... 6
+ Hon. James P. McGovern, a Representative in Congress from the
+ State of Massachusetts, questions for the record........... 49
+
+
+ DEPARTMENT OF HEALTH AND HUMAN
+ SERVICES FISCAL YEAR 2008 BUDGET REQUEST
+
+ ----------
+
+
+ TUESDAY, FEBRUARY 13, 2007
+
+ House of Representatives,
+ Committee on the Budget,
+ Washington, DC.
+ The Committee met, pursuant to call, at 2:05 p.m., in room
+210, Cannon House Office Building, Hon. John M. Spratt, Jr.
+(Chairman of the Committee) presiding.
+ Present: Representatives Spratt, DeLauro, Cooper, Allen,
+Schwartz, Doggett, Berry, McGovern, Sutton, Andrews, Scott,
+Etheridge, Hooley, Bishop, Ryan, Bonner, Garrett, Hensarling,
+Conaway, Tiberi, Porter, Alexander, Smith.
+ Chairman Spratt. Secretary Leavitt, welcome to our hearing
+today, and thank you for coming.
+ The purpose of the hearing today is to discuss the
+President's budget request for the Department over which you
+are the Chief Executive, Department of Health and Human
+Services, and to give our Committee members the opportunity to
+delve into the President's proposal in more depth and detail.
+ I extend a warm welcome to you. We appreciate your coming,
+and we look forward to your testimony.
+ There are some significant cuts or cost reductions in the
+budget that has been sent to us. Medicare would experience a
+cut over ten years, cost reduction, call it what you will, of
+$252 billion. Medicaid, at least $29 billion over the same ten-
+year period of time.
+ CHIPs, Children's Health Insurance Program, a program in
+effect since 1997, would be increased but not enough by our
+calculation to cover the existing beneficiary population of
+around four and a half million children. We are concerned that
+fewer children would actually be covered under the funding
+proposal that the Administration has put forth.
+ So we have some significant questions to discuss with you
+today.
+ The President's budget has to be viewed in a larger
+context. We note with some dismay that these cuts have been
+made, 252 billion in Medicare, 28 to $29 billion in Medicaid.
+And, yet, this money has not been, the savings to the extent
+there are savings, have not been redeployed or reinvested in
+other healthcare programs.
+ There are gaping needs in the realm of healthcare, and we
+are dismayed to see that these cuts, if they are taken, will
+not be used to shore up other problems with other programs.
+ The Administration tells us that big program cuts are
+necessary because entitlement spending is growing at a fast
+clip. We know that. We understand that our population is aging.
+It is going to put unprecedented pressure on our healthcare
+entitlements. And we need to be looking for solutions, no
+question about it, not when the pressure comes to bear, but
+now.
+ But as we accumulate debt, and the budget before us will
+accumulate $900 billion in additional statutory debt over the
+next two years, as we stack this debt on top of debt, we are
+adding to something called debt service obligations and leaving
+a legacy for years to come of debt service, interest on the
+national debt that has to be paid which by the end of the
+budget period, the time frame we are talking about, 2012, the
+target year for balancing the budget, interest on the national
+debt by our calculation, by CBO's calculation will be $285
+billion, a substantial sum of money.
+ As a consequence, these are dollars that are squeezed out
+of the budget that could otherwise be used for Medicare,
+Medicaid, or Children's Health Insurance or Social Security.
+ Federal healthcare spending does not exist in a vacuum. We
+all know that. And one of the problems with reining in the
+growing cost of Medicare and Medicaid and our healthcare
+entitlements generally is that they are all a subset of the
+cost of healthcare delivery in our economy as a whole.
+ This Administration understands that. We understand it. And
+what we need to be about and looking for, among other things,
+are holistic solutions and not nickel and dime, case-by-case,
+piece-by-piece solutions. In that connection, we are concerned.
+ We want to hear more about the Administration's proposal to
+remove the manner in which employer-provided health insurance
+is now extended to their employees such that it is deductible
+out of the employer and excluded from income by the employee.
+In its place will be a standard deduction of $15,000 for a
+family.
+ It raises lots of questions that we would like to raise
+with you today, so we can get a clarification of that and a
+better understanding of whether this is the route to a
+solution, not just opening Pandora's box with lots more
+problems to come from it.
+ So we have much to talk about, and we are glad to hear your
+testimony first and then put some questions to you about these
+vital issues, vital to us as we put a budget together, and
+vital even more to the American people.
+ Before receiving your statement, though, Mr. Ryan has a
+statement he would like to make.
+ [The prepared statement of Mr. Spratt follows:]
+
+ Prepared Statement of Hon. John M. Spratt, Jr., Chairman,
+ House Committee on the Budget
+
+ Good afternoon, and welcome to the House Budget Committee's hearing
+on the 2008 budget request for the Department of Health and Human
+Services. The purpose of this hearing is to discuss the President's
+budget request for HHS and give members an opportunity to delve into
+the President's proposals in more detail. I would like to extend a warm
+welcome to Secretary Leavitt, who is making his debut appearance before
+the House Budget Committee as HHS Secretary. We are delighted to have
+you here.
+ The President's budget for HHS must be viewed in the larger context
+of the fiscal policies this Administration has pursued. The President's
+2008 budget continues the same policies that helped create the fiscal
+plight now facing the federal government. To help pay for nearly $2
+trillion in tax cuts over the next ten years, the budget cuts Medicare
+by $252 billion and Medicaid by $28 billion over that same time period.
+Rather than reinvest those savings in improvements to the health
+programs on which tens of millions of Americans rely, the budget
+instead creates a new set of tax incentives for the purchase of health
+coverage that gives the largest subsidies to the most well-off
+Americans and provides substantially less help to working families who
+have the most trouble affording health insurance. The HHS budget also
+cuts or freezes several safety-net programs and vital supports for
+struggling working families such as child care. These cuts won't make a
+dent in our long-term deficit picture, but they will cause real harm to
+millions of families that depend on these services to stay employed and
+make ends meet.
+ The Administration argues that big program cuts are necessary
+because entitlement spending is growing. We all know that the aging of
+our population is going to put unprecedented pressure on our health and
+our retirement systems. And we need to be looking for solutions now,
+not when the pressure comes to bear. But the solution does not lie in
+digging the fiscal hole deeper today. As long as we are accumulating
+debt and stacking debt on top of debt, we are making it more and more
+difficult to accommodate the demands that we know are coming as a
+larger share of the population becomes eligible for Medicare, Medicaid,
+and Social Security. For example, under the President's budget, we are
+going to spend an estimated $239 billion on net interest on the debt
+this year, rising to $285 billion in 2012. If this Administration would
+pursue a more fiscally responsible course, we could substantially
+reduce the amount of federal debt and spend significantly less on debt
+service, thereby freeing up hundreds of billions of dollars that could
+be dedicated to shoring up the solvency of Social Security.
+ Another thing to keep in mind is that federal health spending does
+not exist in a vacuum. The Federal Government is heavily invested in
+the health care sector. We have got two major health care entitlements
+and other, smaller entitlement programs that are significant as well:
+Veterans Administration, military health care, and Federal employees
+health care. All of these make the Federal Government far and away the
+largest purchaser of health care in our entire economy. But this
+reminds us that the problem of growing health spending that we are
+talking about today is not unique to Medicare or Medicaid or any of the
+other federal health care programs. It is part and parcel of the
+problem of health care in our entire society.
+ So the challenges we face are considerable ones, indeed, and I am
+glad that Secretary Leavitt is here today to help us understand the
+Administration's thinking on these issues. Before turning to the
+Secretary for his testimony, I recognize the Ranking Member, Mr. Ryan,
+for any comments he may wish to make.
+
+ Mr. Ryan. Thank you, Mr. Chairman.
+ Welcome, Secretary Leavitt.
+ I want to begin by commending Chairman Spratt on his choice
+of hearing topics and witnesses in the past few weeks. I think
+these have been very good hearings. We have had excellent
+witnesses, all speaking to the topics that we really have to
+get our hands around. So I want to thank the Chairman for this
+good panel of hearings.
+ And nearly all of us have largely focused on the need for
+immediate substantive reforms to our nation's largest
+entitlements. Considering that two of the most financially
+troubled entitlement programs, Medicare and Medicaid, are in
+HHS, I would imagine Secretary Leavitt, you know, that is why
+he is here today.
+ And I am glad you are here today because the big money
+accounts are in your agency, Secretary Leavitt.
+ We all know how we got here. Back in the 1960s when
+President Johnson created these programs as part of the great
+society, he created them on a pay-as-you-go basis. And
+certainly most Americans and most in Congress, for that matter,
+agree with the mission of these programs. That is not the
+question.
+ The question is, is there a better way to accomplish the
+mission of these programs without bankrupting our children,
+because according to GAO, by the year 2040, when my kids are my
+age, they will have to pay twice as much in federal taxes as we
+do now just to keep our largest entitlements going in the same
+form as they are today? No new spending, no new benefits,
+double the taxes just to pay the status quo for my kids when
+they are my age.
+ Clearly we cannot let this happen. How do we prevent it?
+That is the key question. How do we meet the mission of these
+programs and prevent that from happening to my kids and your
+kids and your grand kids?
+ The President proposes a particular set of reforms in these
+programs to help get on a path toward long-term sustainability,
+and we can and should debate whether these are the right
+combination of reforms or not. But I do not think there is an
+honest debate to be had on whether or not Congress should act
+on this. We simply must.
+ I will simply end with one quote from, I think, the first
+witness we had which was the Comptroller, General David Walker,
+who spoke to this Committee a few weeks ago where he said,
+``Healthcare is the number one fiscal challenge for federal and
+state governments. Number two, it is the number one
+competitiveness challenge for American businesses. Number
+three, it is a growing challenge for American families. Let me
+just tell you if there is one thing that can bankrupt America
+it is healthcare. We need dramatic and fundamental reform.''
+ I clearly agree with that statement, that assessment. This
+is the Budget Committee, and the budget buster for America
+today and for sure tomorrow is healthcare. That is why we are
+going to have to figure how to meet the mission of these very
+important programs while making sure we can keep our budget
+balanced and not double the tax burden on the next generation.
+ With that, I yield. Thank you, Chairman.
+ Chairman Spratt. Thank you, Mr. Ryan.
+ Mr. Secretary, you can offer your statement for the record.
+And without objection, it will be made part of the record so
+that you can summarize all or part of it.
+ In addition, I ask unanimous consent that all members who
+care to submit a statement be allowed to submit an opening
+statement for the record at this point. Without objection, so
+ordered.
+ Mr. Secretary, the floor is yours. Thank you again for
+coming.
+
+ STATEMENT OF MICHAEL O. LEAVITT, SECRETARY,
+ U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES
+
+ Secretary Leavitt. Thank you, Mr. Chairman, Mr. Ryan,
+ladies and gentlemen of the Committee.
+ I would prefer to have my statement as part of the record
+and would like to summarize just to give our discussion some
+context.
+ This is a big budget as you have indicated, and it has
+required hundreds of people the better part of a year. There
+are tens of thousands of individual decisions made. I found it
+best to have these discussions in the context of the guidance
+that I have given those who have prepared it. I think that
+might be helpful for you to know. And I will try to answer your
+questions in the context of those of the guidance I gave them.
+ Make no mistake about it. This is a budget aimed at
+reducing the deficit and looking to balance the budget by 2012.
+Any time that you are developing a budget, no one knows better
+than this Committee you are faced with making decisions about
+competing, noble ideas.
+ I have little question that the decisions that I made in
+some of those tens of thousands of decisions will not be the
+same ones that you would. I am here to explain to you as best I
+can the basis on which those were made.
+ I would like to just tell you in billboard phrases, if I
+could, the guidance that I gave the budget preparers at HHS. I
+pointed out first of all, it is a deficit reduction budget.
+Second, I indicated to them there would be some new things that
+we needed to add to the budget, but I wanted them to be truly
+critical.
+ I gave them four examples. One would be high-demand,
+highly-effective programs. I will give you an example of that,
+the Indian Health Service or Head Start. I wanted to protect
+that. Presidential initiatives, a good example would be the
+Community Health Centers. Pressing new problems, I was
+concerned and continue to be about drug efficacy and safety and
+the speed with which we are able to approve new generic drugs.
+ You will also see some things that have been here before,
+health IT. I am anxious to see progress made there. Fraud and
+abuse in Medicare, a subject that I feel some passion about
+right now.
+ So those are new things. Then I said to them we are going
+to have to make these decisions with respect to ongoing
+problems. I would like you to look for six or seven things in
+particular.
+ One, if you find any one-time funds that we finished the
+project, let us not repeat them.
+ Second, I said I want to have a bias towards actually
+providing services, not just building infrastructure for the
+future. We all know that you need infrastructure and you need
+services. But when you are working to devise a budget to
+balance, I wanted to emphasize direct services.
+ The next would be looking for grant programs where the
+activities have been completed. I see a lot of these at NIH.
+And in order to continue to focus on new science and to get the
+best of the best, rather than allow grants just to continue
+perpetually, when they reach the end of their term, I have
+asked for them to automatically be renewed and to put more new
+grant programs that they compete for.
+ And that is an example of the kind of thing. And sometimes
+that comes out looking like it is a reduction, but the reality
+is you are getting more new grants than you were before.
+ Under-performing programs, there will be disagreement on
+what is under-performing. We have tried to find programs that
+we could measure. And if we cannot measure it, then we have got
+to have some method of demonstrating that it is a performing
+program. And when we have not, it has been a candidate for
+reduction.
+ You will see some things that I have been back to this
+Committee and others for a couple of years now. One would be
+durable medical equipment, some old controversies that I still
+feel some passion about.
+ You mentioned the Medicare and the entitlements. There is
+no question that that is where we need to focus. And I have
+gone through Medicare as carefully as I can and looked for
+every component piece of it and asked the question, is there
+some way we can begin to turn the line down a little.
+ I made the point to them and I will to you today that I
+have been looking--this is weight reduction, not amputation.
+But you will see a whole series of very small changes. When I
+say small, they are individual components that when you add
+them all up, it gets to a big number over time.
+ If you went out ten years, it would be a much bigger number
+than that. And if you went out twenty, we would start into the
+trillions. The point is there is a time and a life of every
+problem when the changes are big enough you can see they need
+to be made, but still small enough you can make them. And right
+now we need to be focused on them.
+ The changes that I have recommended in this budget, if we
+did them all, would still only keep the Medicare Trust Fund
+solvent for four more years. So it is a start. And you may not
+agree with all of them, but I am prepared to defend them.
+ And if you want to talk them about them individually, I
+would be delighted to do it. And why don't we go directly to
+questions, Mr. Chairman.
+ [The prepared statement of Michael O. Leavitt follows:]
+
+ Prepared Statement of Hon. Michael O. Leavitt, Secretary,
+ U.S. Department of Health and Human Services
+
+ Chairman Spratt and Congressman Ryan, thank you for the invitation
+to discuss the Department of Health and Human Services' budget proposal
+for fiscal year 2008.
+ For the past six years, this Administration has worked hard to make
+America a healthier, safer and more compassionate nation. Today, we
+look forward to building on our past successes as we plan for a hopeful
+future.
+ The President and I have set out an aggressive, yet responsible,
+budget that defines an optimistic agenda for the upcoming fiscal year.
+This budget reflects our commitment to bringing affordable health care
+to all Americans, protecting our nation against public health threats,
+advancing medical research, and serving our citizens with compassion
+while maintaining sensible stewardship of their tax dollars.
+ To support those goals, President Bush proposes total outlays of
+nearly $700 billion for Health and Human Services. That is an increase
+of more than $28 billion from 2007, or more than 4 percent. This
+funding level includes $67.6 billion in discretionary spending.
+ For 2008, our budget reflects sound financial stewardship that will
+put us on a solid path toward the President's new goal to achieve a
+balanced budget by 2012.
+ I will be frank with you. There will never be enough money to
+satisfy all wants and needs, and we had to make some tough choices.
+ We take seriously our responsibility to make decisions that reflect
+our highest priorities and have the highest pay-off potential. We
+recognize that others may have a different view, and there are those
+who will assume that any reduction signals a lack of caring. But
+reducing or ending a program does not imply an absence of compassion.
+We have a duty to the taxpayers to manage their money in the way that
+will benefit America the most.
+ I would like to spend the next several minutes highlighting some of
+the key programs and initiatives that will take us down the road to a
+healthier and safer nation.
+ transforming the health care system
+Helping the Uninsured
+ The President has laid out a bold path to strengthen our
+health care system by emphasizing the importance of quality, expanded
+access, and increasing efficiencies.
+ The President's Affordable Choices Initiative will help
+States make basic private health insurance available and will provide
+additional help to Americans who cannot afford insurance or who have
+persistently high medical expenses.
+ It moves us away from a centralized system of Federal
+subsidies; and,
+ It allows States to develop innovative approaches to
+expanding basic health coverage tailored to their populations
+ The President's plan to reform the tax code with a
+standard deduction ($15,000 for families; $7,500 for individuals) for
+health insurance will make coverage more affordable, allowing more
+Americans to purchase insurance coverage.
+Value-driven Health Care
+ The Budget provides funds to accelerate the movement
+toward personalized medicine, in order to provide the best treatment
+and prevention for each patient, based on highly-individualized
+information.
+ It provides $15 million for expanding efforts in
+personalized medicine using information technology to link clinical
+care with research to improve health care quality while lowering costs;
+and,
+ It will expand the number of Ambulatory Quality Alliance
+Pilots from 18 sites in FY 2008.
+Health IT
+ The President's budget proposes $118 million for the Office of the
+National Coordinator for Health Information Technology to keep us on
+track to have personal electronic health records for most Americans by
+2014 by supporting our efforts to:
+ Implement agreed upon public-private health data
+standards.
+ Initiate projects in up to twelve communities based on
+recommendations of the American Health Information Community. These
+projects will demonstrate the value of widespread availability and
+access of reliable and interoperable health information.
+ Develop the Partnership for Health and Care Improvement, a
+new, permanent non-governmental entity to effect a sustainable
+transition from the AHIC.
+ addressing the fiscal challenge of entitlement growth
+ The single largest challenge we face is the unsustainable growth in
+entitlement programs such as Medicare and Medicaid. The Administration
+is committed to strengthening the long-term fiscal position of Medicare
+and Medicaid and to moderating the growth of entitlement spending. The
+FY2008 Budget begins to address Medicare and Medicaid entitlement
+spending growth by proposing a package of reforms to promote
+efficiency, encourage beneficiary responsibility, and strengthen
+program integrity.
+Medicaid
+ Medicaid is a critical program that delivers compassionate care to
+more than 50 million Americans who cannot afford it. In 2008 we expect
+total Federal Medicaid outlays to be $204 billion, a $12 billion
+increase over last year.
+ The Deficit Reduction Act (DRA) that President Bush signed into law
+last year has already transformed the Medicaid program. The DRA reduced
+Medicaid fraud and abuse and also instituted valuable tools for States
+to reform their Medicaid programs to resemble the private sector.
+ In FY 2008, we are also proposing a series of legislative and
+administrative changes that will result in a combined savings of $25.3
+billion over the next five years, which will keep Medicaid up to date
+and sustainable in the years to come. Even with these changes, Medicaid
+spending will continue to grow on average more than 7 percent per year
+over the next five years.
+ Along with the fiscally responsible steps we are taking with
+Medicaid, we are following the same values in modernizing Medicare.
+Medicare
+ Gross funding for Medicare benefits, which will help 44.6 million
+Americans, is expected to be nearly $454 billion in FY 2008, an
+increase of $28 billion over the previous year.
+ In its first year, the Medicare prescription drug benefit has been
+an unparalleled success. On average, beneficiaries are saving more than
+$1,200 annually when compared to not having drug coverage, and more
+than 75 percent of enrollees are satisfied with their coverage. Because
+of competition and aggressive negotiating, payments to plans over the
+next ten years will be $113 billion lower than projected last summer.
+ We also plan a series of legislative reforms to strengthen the
+long-term viability of Medicare that will save $66 billion over five
+years and slow the program's growth rate over that time period from
+6.5% to 5.6%.
+ Similarly, we are proposing a host of administrative reforms to
+strengthen program integrity; improving efficiency and productivity;
+and reduce waste, fraud and abuse--all of which will save another $10
+billion over the next five years.
+ promoting health and preventing illness
+ We are also taking steps in other ways to transform our health care
+system. Helping people stay healthy longer also helps to reduce our
+nation's burden of health care costs. The President's budget will:
+ Fund $17 million for CDC's Adolescent Health Promotion
+Initiative to empower young people to take responsibility for their
+personal health.
+ Strengthen FDA's drug safety efforts and modernize the way
+we review drugs to ensure patients are confident the drugs they take
+are safe and effective.
+ Enhance FDA and CDC programs to keep our food supply one
+of the safest in the world by improving our systems to prevent, detect
+and respond to outbreaks of food borne illness; and,
+ Include $87 million to increase the capacity for the
+review of generic drugs applications at the FDA and increase access to
+cheaper generic drugs for American consumers.
+ providing health care to those in need
+ SCHIP expires at the end of FY 2007 and the President's budget
+proposes to reauthorize SCHIP for five more years, to increase the
+program's allotments by about $5 billion over that time, to refocus the
+program on low-income uninsured children, and to target SCHIP funds
+more efficiently to States with the most need.
+ The President's budget proposes nearly $2 billion to fund health
+center sites, including sites in high poverty counties. In FY 2008,
+these sites will serve more than 16 million people.
+ We propose increasing the budget of the Indian Health Service to
+provide health support of federally recognized tribes to over $4.1
+billion, which will help an estimated 1.9 million eligible American
+Indians and Alaskan Natives next year.
+ We are also proposing nearly $3 billion to support the health care
+needs of those living with HIV/AIDS and to expand HIV/AIDS testing
+programs nationwide.
+ In addition, we are requesting that Congress fund $25 million in FY
+2008 for treating the illnesses of the heroic first responders at the
+World Trade Center.
+ protecting the nation against threats
+ We must continue our efforts to prepare to respond to bioterrorism
+and an influenza pandemic.
+ Some may have become complacent in the time that has passed since
+the anthrax-laced letters were delivered in 2001, but we have not.
+Others may have become complacent because a flu pandemic has not yet
+emerged, but we have not.
+ The President's budget calls for nearly $4.3 billion for
+bioterrorism spending.
+ In addition, we are requesting a $139 million in funding
+to expand, train and exercise medical emergency teams to respond to a
+real or potential threat.
+ Our budget requests $870 million to continue funding the
+President's Plan to prepare against an influenza pandemic. The budget
+requests funding to increase vaccine production capacity and
+stockpiling; buy additional antivirals; develop rapid diagnostic tests;
+and enhance our rapid response capabilities.
+ In FY 2008, the Advanced Research and Development program
+is requested within the Office of the Assistant Secretary for
+Preparedness and Response (ASPR). Total funding of $189 million will
+improve the coordination of development, manufacturing, and acquisition
+of chemical, biological, radiological, or nuclear (CBRN) Medical
+Countermeasures (MCM).
+ advancing medical research
+ The research sponsored by NIH has led to dramatic reductions in
+death and disease. New opportunities are on the horizon, and we intend
+to seize them by requesting $28.9 billion for NIH.
+ Our proposal in FY 2008 will allow NIH to fund nearly 10,200 new
+and competing research grants, continue to support innovative,
+crosscutting research through the Roadmap for Medical Research, and
+support talented scientists in biomedical research.
+ protecting life, family and human dignity
+ Our budget request would fund $884 million in activities to help
+those trying to escape the cycle of substance abuse; children who are
+victims of abuse and neglect; those who seek permanent, supportive
+families through adoption from foster care; and the thousands of
+refugees that come to our country in the hopes of a better life.
+ Our budget request also includes $ 1.3 billion to help millions of
+elderly individuals and their family caregivers to remain healthy and
+independent in their own homes and communities for as long as possible,
+including the $28 million for our Choice for Independence initiative
+that will help states create more cost-effective and consumer-driven
+systems of long-term care.
+ improving the human condition around the world
+ If we are to improve the health of our own people, we must reach
+out to help other nations to improve the health of people throughout
+the world.
+ Our budget requests $2 million to launch a new Latin America Health
+initiative to develop and train a cadre of community health care
+workers who can bring much needed medical care to rural areas of
+Central America.
+ CDC and NIH will continue to work internationally to reduce illness
+and death from a myriad of diseases, and in so doing will support the
+President's Malaria Initiative; the Global Fund to Fight HIV/AIDS,
+Tuberculosis, and Malaria; and the President's Emergency Plan for AIDS
+Relief.
+ These are just some of the highlights of our budget proposal. Both
+the President and I believe that we have crafted a strong, fiscally
+responsible budget at a challenging time for the federal government,
+with the need to further strengthen the economy and continue to protect
+the homeland.
+ We look forward to working with Congress, States, the medical
+community, and all Americans as we work to carry out the initiatives
+President Bush is proposing to build a healthier, safer and stronger
+America.
+ Now, I will be happy to take a few questions.
+
+ Chairman Spratt. Well, let us start with CHIP.
+ Secretary Leavitt. All right.
+ Chairman Spratt. That is a particular case where you are
+adding funds. But, unfortunately, under the Children's Health
+Insurance Program, as we understand the projections, in order
+just to keep the kids covered who are now covered, we need
+about 13 to $15 billion over and above the baseline funding,
+five years of $25 billion.
+ Is that different from your assumptions about it?
+ Secretary Leavitt. It is. Let me state for you as clearly
+as I can the policies we intend to pursue in the
+reauthorization.
+ First, important to state we enthusiastically endorse its
+renewal. We see it as being valuable in the same way others do.
+We would, however, like to focus it on children. We recognize
+that some states have included adults, and we follow a policy
+that will allow existing adult populations to continue.
+However, we would like not----
+ Chairman Spratt. Are these parents for the most part?
+ Secretary Leavitt. For the most part, they are adult
+parents.
+ Chairman Spratt. Guardians, parents?
+ Secretary Leavitt. There are three states who have
+substantially more adults than they do children on the program.
+And we think it ought to be focused on children.
+ We also believe that if we are going to be subsidizing
+states in pursuit of populations over 200 percent of the
+poverty line that we should limit our match to be the same
+match that would be available to them under Medicaid.
+ In other words, we want to continue to the enhanced match
+up to 200 percent, but would limit our match to the regular
+FMAP or match that we pay each state.
+ Chairman Spratt. Well, at 4.7 million children covered
+today, as I understand it, and there are grave doubts in
+Congress, CBO, this Committee staff, elsewhere that the amount
+you are providing is going to be enough over a five-year period
+of time. We have already got what, 16 states that are about to
+run dry. There is simply not enough provided there, even with
+these changes and eligibility, to even cover the 4.6 million
+kids now covered.
+ Is that a concern?
+ Secretary Leavitt. We believe that the budget we have
+proposed is adequate to meet the policy guidelines that I have
+just articulated. We are prepared to engage in a conversation
+about what it takes to do that, but we believe our budget
+proposal to be adequate.
+ Chairman Spratt. A concern as you look through this budget,
+it looks like kids take it on the chin repeatedly. The Children
+Care Development Block Grant costs $39 million. Not a lot of
+money, but it goes to children and child care. And by the
+estimates we have gotten, child care systems would drop by
+100,000 in the year 2008.
+ The CHIP Program was specifically created for children, and
+I would agree with you. Without knowing more about the issue
+that it should be confined to children. It was created in 1997
+as part of the balanced budget agreement. The Clinton
+Administration said we are going to make some tough, hard
+decisions, some big substantial cost reductions in Medicare and
+Medicaid. But our diligence and forbearance, we are going to do
+a few things that are positive as well.
+ And one of them was Children's Health Insurance. And it has
+been a very successful program except that only three out of
+ten children are covered. As I understand, only 30 percent of
+the eligible population of children are actually covered.
+ Is that your understanding also at HHS?
+ Secretary Leavitt. I am not able to validate that
+statistic. I will say to you, Mr. Chairman, that we do believe
+it has been a very positive program as do you. We believe that
+it should be our aspiration as a country to assure that every
+American, children and adult, have access to an affordable
+basic insurance policy.
+ We see SCHIP being an important role, but not as the
+vehicle to provide it for everyone or, for that matter, even
+all children. It certainly should be the vehicle we use to
+cover those who are in specific financial need.
+ I was in a State yesterday where they are working to
+create, as many states are, a plan that would give everyone in
+their State access to an affordable policy.
+ I had discussions with the Governor about ways we could use
+SCHIP to connect to other policies that are being provided in
+the marketplace so that we could keep families together but not
+have to start using SCHIP as the vehicle to bring all adults.
+ There are ways to use this program efficiently to target a
+population who needs help, but we ought not to view it as the
+way in which we cover every child or any person under 18. There
+are other ways to accomplish that that we think are superior.
+ Chairman Spratt. Would you submit for the record, please,
+your own analysis, your Department's analysis of how many
+children are likely to be covered and provided for under the
+CHIP Program at the level of funding you are requesting?
+ Secretary Leavitt. We would be pleased to respond.
+ Chairman Spratt. Fine. Others have questions. I want to
+turn to them. But thank you again for your testimony.
+ Mr. Ryan. I want to say Governor, but, Secretary----
+ Secretary Leavitt. Thank you.
+ Mr. Ryan [continuing]. Secretary, you are a Medicare
+trustee, right?
+ Secretary Leavitt. Yes, I am.
+ Mr. Ryan. Yeah. According to the trustees, the unfunded
+liability of Medicare totals 35 trillion over the next 75
+years, so that is the three-generation window we kind of look
+at.
+ This budget reduces the unfunded liability by eight
+trillion over that same period, correct?
+ Secretary Leavitt. Yes. If you go out far enough, it gets
+into the trillions.
+ Mr. Ryan. How would we make up the rest? Do you have any
+ideas about how we can, in addition to what this budget is
+proposing, take care of the rest and try and bend the curve
+even more to get more savings, so we do not have still a, you
+know, 20 plus trillion dollar unfunded liability?
+ Secretary Leavitt. As you pointed out, the proposal that we
+are making today in this budget would reduce the growth rate
+from 6.5 percent down to 5.6 percent.
+ Mr. Ryan. So Medicare spending, even if every one of your
+recommended policies occurs, would still continue to grow at--
+--
+ Secretary Leavitt. Five point six percent a year.
+ Mr. Ryan. Instead of six point----
+ Secretary Leavitt. That is right. The impact of that going
+out is substantial. The sooner we start making these changes,
+the better the result will be in the long term.
+ As I indicated, we have attempted in every case to make
+these weight loss, not amputation. We worked to find ways that
+we would not affect beneficiaries, but that we could deliver
+good, basic healthcare to our seniors in a sustainable way.
+ Mr. Ryan. Given that Medicare and Medicaid essentially sort
+of pay for today's healthcare for the targeted populations that
+Medicare and Medicaid want to help, the road sort of leads back
+to getting at the root cause of healthcare inflation in order
+to drive down these out-year costs and, you know, reduce this
+incredible unfunded liability. The Administration put out a
+very bold plan on healthcare itself.
+ Can you walk through the thinking, the methodology, and
+basically the strategy for going after high healthcare
+inflation and how your proposal deals with sort of bending the
+curve on medical inflation by more rationally getting benefits
+distributed by, you know, having the uninsured cared for and
+those things? How do you fix healthcare so that you can fix
+these entitlements and what is the Administration's plan to do
+that? That is basically my question.
+ Secretary Leavitt. Mr. Ryan, I would argue that we do not
+actually have in this country a healthcare system. What we have
+is a large, robust, rapidly-growing healthcare sector that
+employs millions of people, but there is nothing that connects
+it into an economic system.
+ There are lots of economic systems in our lives. Our banks,
+for example. I have a bank card. You have one. Other members of
+the Committee have them. Banks competed for our business on the
+basis of interest rates and service, but they all use the same
+system to optimize the value that they provide us.
+ The same is true with many other systems. The internet
+itself is an economic system that is built with a group of
+standards that connect us all together.
+ We believe the first step is to move healthcare from a
+large, robust, undisciplined sector to a system. To build that
+system, we believe that there are five components. The first is
+electronic connectedness. We have to connect electronic health
+records.
+ Second, there is a need for us to have quality measures
+independently so that people know what they are buying and how
+good it is, so they can compare it.
+ The third would be what I refer to as episodes of care or
+buckets of care that you can compare so that you can take
+comparable cost and comparable quality and make a decision as
+to value.
+ Mr. Ryan. So real transparency and price and quality?
+ Secretary Leavitt. I am talking about a system of
+competition based on value and the ability to compare so that
+the market actually works. There are other aspects to it, but
+that would give you a summary.
+ Mr. Ryan. And how does the Administration's plan advance
+this?
+ Secretary Leavitt. Well, I will tell you that by April of
+this year, we will have 60 percent of the healthcare
+marketplace that will have committed, including the federal
+government, to use our purchasing power to adopt the four
+cornerstones I mentioned.
+ Health records. For example, it is now the policy of the
+federal government that if you are going to do business with us
+in the future, you have to have connected electronic health
+records. If you are going to do business with us, you have to
+have identifiable quality measures that have been developed by
+the medical community and use them. If you are going to do
+business with us, you have to have comparable costs and you
+need to know we are going to use these to create incentives to
+drive quality up and cost down.
+ We have been joined by the largest payers in the country in
+doing that, including states, including the largest employers,
+and we will have 60 percent of the entire marketplace committed
+to making that a criteria of selection for their vendors by
+April. And by 2008, you will see this begin to unfold.
+ Within two years, you will see competition based on value
+beginning to turn up in markets around the country. In five
+years, you will see this as value being a very important part
+of the market generally. And in ten years, this will be
+ubiquitous.
+ We believe that, in fact, competition based on value will
+begin to moderate that curve and give us the relief that we so
+desperately need to maintain a prosperous economy.
+ Mr. Ryan. OK. So if we take a given market and use the
+payers in a given market, let us take the private payers, take
+a couple big companies like Blue Cross and United and Aetna,
+big payers, but the biggest being you, the Medicare 100 percent
+file, that gives us enough of a data sample to measure the
+price of a good and to get into measuring quality as defined by
+the providers, and that will give us enough data to basically
+be able to make this value equation? Is that kind of what you
+are essentially saying?
+ Secretary Leavitt. You properly point out that because
+there is no national market for healthcare, this has to be done
+regionally.
+ I was in Detroit, for example, two weeks ago, and I had the
+big three auto makers join with the federal government and
+states in that region and the largest other payers, and we all
+committed ourselves to pursue this as a policy of selection.
+When we buy healthcare, this is what we are going to ask for.
+ Now, Detroit and in that area, very soon you will begin to
+see hip replacements, knee replacements, and other things
+comparable cost and comparable quality based on standards that
+the medical family have developed.
+ Mr. Ryan. And this will be made available to the public,
+not just those who buy through these different networks, not
+just necessarily federal employees or people who are in the
+networks of the other payers?
+ Secretary Leavitt. Once this information is available, it
+will find its way into the purchase of healthcare in many
+different ways. Employers will provide it. Health plans will
+provide it. I am sure there will be a travelocity for
+healthcare that will begin to develop. People will begin to
+have the capacity to make comparable purchases.
+ And we have all had experiences like this. We know how
+effective this would be. Competition works in healthcare if we
+have access to----
+ Mr. Ryan. Information.
+ Secretary Leavitt [continuing]. Reliable, consistent
+information about the quality and the cost.
+ Mr. Ryan. And I will just finish with this because the
+Chairman has been liberal with the time. The Medicare 100
+percent file, which is a HIPAA compliant claims file that you
+have, you do have the ability, do you not, to release that data
+in any given market so that payers, patients can use your data
+along with other data samples to get this measure? And you can
+and are you releasing that 100 percent file?
+ Secretary Leavitt. I have authority to do that under
+certain conditions, and we are preparing a process by which it
+can be released in coordination with all of the other
+activities we are doing.
+ Mr. Ryan. That is what I am trying to get at. To the extent
+that you can simplify and make much easier the ability to
+release that Medicare 100 percent file, which is HIPAA
+compliant, that all to the better to get this transparency
+thing off the ground, and that would be very helpful.
+ Thank you.
+ Chairman Spratt. Mr. Cooper.
+ Mr. Cooper. Thank you, Mr. Chairman.
+ And thank you, Mr. Secretary.
+ My five minutes, I would like to focus on the healthcare
+tax expenditure reform that the Administration is proposing and
+also a couple of Medicaid issues.
+ First, this may be surprising to you, but I would like to
+praise you and the Administration for your efforts to reform
+the largest individual tax expenditure in America, one that
+Congress never passed into law, and one that is horribly
+regressive. You are the first Administration to have the
+courage to face this issue. I hope that you succeed.
+ And I would like to give some of my Democratic colleagues a
+little bit of confidence here because no less a liberal figure
+than Andy Stern of the SEIU has proposed essentially abandoning
+the employer-based health insurance system.
+ Bob Greenstein, a noted expert on budget issues and health
+issues from the Center for Budget and Policy Priorities, says
+positive things about your tax proposal on his web site. And
+liberal senators like Ron Weiden have put forward health plans
+that make substantial changes in what many Americans assume to
+be the only health system we have.
+ So there are many good features to your proposal. A lot of
+us are worried that the deduction is too meager. If you are
+going to open this up, you might as well turn it into a tax
+credit so that lower-income people are benefited a little bit
+more than in the Administration's proposal.
+ And I would just urge you to be open to modifications like
+that so that we can both reform our tax code and have a more
+efficient healthcare system at the same time.
+ Secretary Leavitt. Thank you, Mr. Cooper.
+ We do have a commitment to take this issue on because it is
+a prerequisite to any states who are currently striving to
+create opportunities for every resident of their State to have
+an affordable basic policy.
+ I am meeting over the next 100 days with every Governor and
+having a discussion with their legislature and with them about
+what tools they need. And without exception, they always run
+into one dilemma and it is the dilemma of the school aide that
+does not work enough hours to get benefits, married to a
+construction worker. Between the two of them, they make pretty
+good money, but they do not have enough money to pay their
+taxes and buy healthcare. And they are discriminated against.
+ And as you say, there is no defensible policy that would
+cause us to give one group of citizens a tax benefit to help
+them buy and not the other, and we are anxious and willing to
+have these conversations. We believe the proposal we have made
+has the impact, but we are open to talk.
+ Mr. Cooper. Mr. Secretary, while you are talking with the
+Governors in your upcoming meeting, it seems that federal,
+state tensions are at an all-time high in terms of
+reimbursement battles over Medicaid, the match, and I would
+assume the SCHIP match as well. Some people call this fiscal
+integrity issues.
+ I hope there is a way to align interest so that people are
+not gaming the system. A report I saw recently from a State-
+sponsored think tank said that the states are essentially
+playing a game of catch me if you can as they use provider
+donations, provider taxes, DISH payments, UPLs, every possible
+acronym you can think up to gain the match.
+ But as we are looking at the states, there was one element
+of your budget proposal that worried me. I have been told that
+you try to eliminate best price for Medicaid drug
+reimbursement.
+ And we just had a hearing in the Government Reform
+Committee last Friday that said states and the federal
+government could be saving four or five billion dollars a year
+if we just had a better and more efficient comparing of best
+price among the states because some states are still using
+antique average wholesale prices. They are not bargaining. They
+are not using their Medicaid rebate like they should, and they
+are leaving billions of dollars on the table.
+ And when we are scrapping for pennies to cover children,
+that seems to be a terrible problem. And I hope that
+abandonment of best price is not part of the Administration's
+budget.
+ Secretary Leavitt. Our strategy is to deal with the issue
+because Medicaid right now is the highest payer of prescription
+drug in the market. And there is clear evidence of that.
+ We want to give states the ability to deal with large
+prescription drug benefit managers the same way that the
+healthcare plans so that they can get the benefit of
+competition. And we believe that will have a positive impact on
+those costs.
+ Mr. Cooper. How about your efforts to persuade your former
+fellow Governors to behave a little bit better and if they
+have--for example, the average Medicaid match is supposed to be
+57 percent. Some states are higher, some are lower. But a lot
+of states have gained this so that they get 80 percent federal
+dollars, 90 percent federal dollars.
+ Secretary Leavitt. There are many instances in Medicaid
+finance that could use purification. The reality is a lot of
+that has happened. And all I think we should look to have is a
+true partnership where we are both putting up our share of the
+money in real dollars.
+ And there is nothing inherently wrong with an
+intergovernmental transfer so long as it is not a scheme to
+take federal dollars and to put them up as match for other
+federal dollars and begin that cycle. And that has happened a
+lot, and we are doing, frankly, everything we can to dissuade
+states from doing that and to close their opportunities to do
+it because we do not think it is fair and it is not in the
+interest of the program.
+ Mr. Cooper. I see that my time is expired. Thank you.
+ Secretary Leavitt. Thank you.
+ Chairman Spratt. Mr. Ryan has an announcement to make to
+the Committee.
+ Mr. Ryan. It is with a great deal of sadness that I want to
+announce that our colleague and friend, Charlie Norwood, lost
+his battle with cancer today. Charlie just passed away earlier
+today of cancer. He was 65 years old.
+ And I know I speak on behalf of all my colleagues and
+friends that this is a sad day for all of us. And Charlie and
+his family are going to be in our thoughts and our prayers. And
+I just simply wanted to take this time to announce that.
+ Thank you.
+ Chairman Spratt. Charlie Norwood was as tough and partisan
+a fighter as you ever met in this institution. But on certain
+occasions, he crossed the aisle and worked with us as Democrats
+on healthcare issues. He was a worthy member of this
+institution. And I would ask everyone to observe a moment of
+silence in his memory and service here.
+ Thank you.
+ Let us see. Mr. Conaway.
+ Mr. Conaway. Thank you, Mr. Chairman.
+ It is with great sadness with the loss of Charlie. What an
+incredible fight he put up over the last two years to go
+through what he did and still try to do the job that we all
+want to do here.
+ Mr. Secretary, thank you for coming today.
+ I want to talk to you a little bit about SGRs and all of
+that, but it seemed to me while you were discussing this grand
+plan of 60 percent of the payers and arguably one of the
+largest sectors we have got for our economy banding together to
+do whatever you want to do.
+ Is there an example where in the free market system without
+the government being involved where 60 percent of the payers
+were able to do that and not run afoul of our antitrust laws? I
+mean, how are we going to square those two?
+ Secretary Leavitt. They are not coordinating their actions
+as a contractual matter, but what they are doing is we have
+identified these four cornerstones of health IT, quality
+assessment, price packaging into identifiable episodes of care
+and the use of incentives, and we have created a--actually, the
+government did not create it. The HR officers of the country in
+cooperation with the medical community created a series of
+questions that could be provided to those who are procuring
+health insurance to use as a criteria for their purchase.
+ And it has been done with the guidance of counsel and all
+of those that would--and not just government counsel, but you
+can bet that the major purchasers of the country have, in fact,
+scrutinized.
+ Our purpose is not to create any kind of effort other than
+to begin creating some standards upon which we could go from a
+sector to a system.
+ Mr. Conaway. The one sector that we do set the price at and
+that is physician reimbursements for those who are under the
+Medicare system. It does not seem that that current system
+works very well. We are constantly ratcheting down physician
+reimbursements. They are at the same level they were at 2001.
+It is now six years later. You know, pick a number for
+inflation, and I do not think that is a sustainable model where
+you have got the government setting the price and doing that to
+these physicians.
+ The impact is we have got evidence that the number of
+physicians who are accepting new Medicare patients has dropped
+in Texas from in the 70 percent range to 62 percent and
+falling.
+ And so as we go through this process, let us not kill the
+goose that laid the golden egg, and that is the ability of
+folks to feed their families and to make money at this system.
+ The broader question, I guess, is, we talk about government
+keeping its promises. What have we promised in regards to
+Medicare/Medicaid? What is this promise that we can look at and
+say, all right, can we afford the promise? We have got $32
+trillion of unfunded promise out there right now, but can we
+afford this promise? What does it look like? What level of
+care? What should be covered in that? Do we have a good idea of
+what that promise ought to look like that this government is
+making day in and day out?
+ Secretary Leavitt. Well, it bears constant review in terms
+of how we are delivering on the promise. There would be lots of
+people in this government who would and in this country who
+would articulate the promise differently.
+ But what we do know is that we need to provide those who
+are elderly, those who are poor, those who are disabled, those
+that are children who need protection. We know that we need to
+provide for mothers who are expectant, to protect their
+children. We need to provide them with basic health insurance
+and we need to pay for most of it.
+ We have made that commitment. Now, we also need to do it in
+a way that is efficient enough that we can keep it. And right
+now I think the evidence is we are not doing it efficiently and
+we are not doing it in a way that will allow anyone in the
+future generation to maintain that promise.
+ Mr. Conaway. One of your comments, you said that we are
+going to do this in a way that we do not affect beneficiaries.
+How do we do that?
+ Secretary Leavitt. Well, there would not be a single person
+on Medicare who would not continue to receive their Medicare
+benefits. But there may be a difference in the way a person who
+makes a half a million dollars receives them over a person who
+makes $50,000.
+ Mr. Conaway. So we will affect beneficiaries, it just--I
+mean, I did not understand how.
+ Secretary Leavitt. They will not lose their benefits. They
+may pay for some of them if they have the ability, but that is
+the way our tax system works.
+ Mr. Conaway. OK. And the SRG system? Any hope on the
+horizon?
+ Secretary Leavitt. Well, I point at the fact that----
+ Mr. Conaway. SGR system. Excuse me.
+ Secretary Leavitt [continuing]. The system requires
+retooling. We cannot just continue to go on every six months
+putting in the so-called doc fix and then moving on. I would
+argue that the system of competition based on value that I
+described ultimately has to be part of the solution.
+ We ultimately need to begin to reward those who provide
+medical services for the highest possible quality at the best
+price. And if we do, they will have an economic model they can
+sustain and our country will have a capacity to keep the
+promise for future generations.
+ Mr. Conaway. My time has expired. Thank you, Mr. Secretary.
+Appreciate you being here.
+ Chairman Spratt. Mr. Allen of Maine.
+ Mr. Allen. Mr. Secretary, thank you for being here.
+ I could not help but think that if Charlie--Charlie and I
+had a number of lively debates on healthcare policy in the
+Commerce Committee, and I wish he were here. He would enjoy the
+conversation with you.
+ You and I differ on the issue of legal abortion, but I
+believe that people can work across that division because to
+the extent we can reduce unintended pregnancies, I think we are
+in search of a common goal.
+ I have two simple questions and then a more difficult one,
+I think.
+ You agree, I assume, that the correct and consistent use of
+condoms and other methods of contraception is an effective way
+to prevent unintended pregnancies?
+ Secretary Leavitt. As you know, this Administration
+supports the ABC approach. And to the degree that that is
+consistent, yes.
+ Mr. Allen. And are you prepared to work to prevent
+unintended pregnancies by supporting sex education programs
+that offer young people medically-accurate information about
+both contraception and abstinence?
+ Secretary Leavitt. It is my belief that those programs are
+best determined at the local level with the involvement of
+parents. And to the degree that we are supporting programs,
+then, yes, we need to work for medical accuracy.
+ Mr. Allen. In Maine, my State has now rejected abstinence-
+only money from the federal government because our experience
+has been that more comprehensive programs turn out to be more
+effective at reducing unintended pregnancies.
+ And in looking at your budget, it looks to me like funding
+for abstinence-only programs is expected to be about 176
+million in fiscal year 2007 and in the 2008 budget request, the
+President is proposing increasing that to $204 million.
+ But Title 10 money is flat funded. And so, you know, where
+I come from, we see the Title 10 money as more scientifically-
+based, more likely to reduce unintended pregnancies.
+ Why not an increase for Title 10?
+ Secretary Leavitt. I respect what you have suggested and
+also the State of Maine. And it is obviously their decision as
+to whether or not they pursue those monies. Title 10 is
+substantially larger as a matter of absolute dollars than the
+$204 million, but it has been the belief of this Administration
+that those dollars pay off and that we want to increase them in
+some proportion, though it is small by comparison to the other
+dollars that are invested by this government.
+ Mr. Allen. So it is a choice. Let me turn to one other
+issue I wanted to raise with you. I have a number of issues
+with the President's healthcare proposal that go to the problem
+of what happens when you enhance the individuals market. I am
+afraid you will wind up leaving people who are older and sicker
+without the opportunity to get health coverage.
+ But the question I have for you is, as I understand the
+President's proposal, it diverts Medicaid disproportionate
+share hospital payments away from hospitals and other
+healthcare providers in order to fund this new program. But
+Medicaid DISH payments today are about $17 billion a year and
+that money goes to a variety of hospitals that are providing
+uncompensated care to people who simply walk in and need the
+service.
+ What in your proposal do you propose to do for those
+hospitals? The issue of uncompensated care is not going to go
+away. The people are not going to go away. Have you thought
+through what happens when you divert that much money?
+ Secretary Leavitt. Yes. Let me speak on both of those
+matters, especially with respect to the employer market. The
+employer market is the vast majority of our market today, will
+likely continue to be that way perpetually, and it needs to be
+protected because it is such an important delivery system.
+ However, there are many people, for one reason or another,
+who end up having to leave the employer market. They either go
+out on their own or their job changes in such a way. And it is
+that problem we have to create a viable alternative for because
+the goal here has to be to get every American access to an
+affordable basic policy.
+ There are certain parts of that problem that the states
+cannot solve on their own. One part is the issue of the tax
+deductibility and the indefensibility of the policy that we
+currently have evolved to. No one voted for it. We just evolved
+to it.
+ Now, with respect to the matter of uncompensated care
+funds, there are some $30 billion that we currently send from
+the federal government into states for the providing of
+essentially three important ongoing needs.
+ The first would be to have uncompensated care, and there is
+no question that we will continue to have people who do not
+have insurance and there needs to be a means by which those
+hospitals can meet those obligations. It is something we all
+feel committed to.
+ A second purpose would be to assure that public hospitals
+are able to remain open and viable.
+ The third area is in helping sustain the overhead of
+various hospitals.
+ The principle at play here is rather than perpetually
+paying the bills of people who are uninsured, does it not make
+sense that we use at least some portion of that to help them
+get insurance? No one is suggesting we take all of that money.
+ We are saying let us look at this in order of magnitude and
+figure out how best to get them insured because they are better
+off and so is the system if they have insurance because they
+get preventative care, they get regular primary care. Right now
+they get it in the emergency room, and it is not a healthy
+system.
+ So the President has asked that I actually go out and sit
+with the states, and I have been in, I think, eleven of them
+since the State of the Union, and I will be in another ten or
+eleven in the next two weeks.
+ And I am sitting with the Governor, I am sitting with the
+legislators, I am sitting with the people who run their health
+system and saying to them how can we use this money better to
+meet those three needs. And if, in fact, we could actually get
+everybody insured, would it not make sure that we would not
+need to spend all of that money perpetually paying their bills.
+ There is no specific proposal on the table except to sit
+down and collaboratively come up with a better way to do what
+we all intend, which is to provide high-quality care to people
+and to have everyone have access to an affordable basic policy.
+ Mr. Allen. Thank you. My time has expired. We could go on
+for a while, but I appreciate your comments.
+ Chairman Spratt. Mr. Alexander.
+ Mr. Alexander. Thank you, Mr. Secretary.
+ I apologize for the way my voice sounds. I am getting
+improper healthcare, I guess.
+ But the first thing I want to do is thank you for the
+attention that you have given Louisiana. We have many people
+there that are depending on the charity hospital system that
+has provided healthcare for Louisiana citizens for years. And
+you have been there on numerous occasions, and we appreciate
+it.
+ Quite frankly, I am surprised you have not pulled out all
+your hair dealing with that issue down there. But, again, thank
+you.
+ My question is about nursing homes. The nursing homes that
+provide skilled nursing care are looking at a pretty sizable
+reduction and not a cut but a reduction in growth of their
+program as we look at a freezing of the market basket the first
+year and then a reduction in the next five years.
+ My question is, are market basket and inflation synonymous
+and, if not, how are they different as you look at them?
+ Secretary Leavitt. This is a very good illustration that I
+think will help members of the Committee understand the way I
+went about dealing with this and other Medicare issues.
+ Skilled nursing is a--we get a Med Pac recommendation. They
+also give us an analysis of the marketplace. They told us, for
+example, that the skilled nursing facilities now have a 9.7
+percent margin in 2006 and an 11 percent in 2007. They
+recommended that we have a zero update in 2008.
+ We also concluded by looking at Med Pac that there would be
+a 1.3 percent productivity gain. Well, frankly, I looked at
+those margins, I looked at the fact that we are seeing an
+increase in the market, and I said we have got to do something
+to turn that line down a little bit. It looks to me like here
+is a place we could afford to do it.
+ Now, frankly, I would prefer as we talked to have a more
+market-based system. But given the fact that we set prices
+essentially here, and that is my job, that is the rationale I
+use.
+ Let us just take the productivity gain, give half of it to
+them, we will put half of it into taxpayers, and they are still
+having substantial operating margins and we are seeing an
+increase in the number. That tells me what the market, in fact,
+if it could find its way to a level, would likely find its way
+to a level that I have suggested. And, you know, it is not
+perfect, but it is the best logic given what I have to work
+with that I could come up with.
+ Mr. Alexander. Thank you, sir.
+ That is all, Mr. Chairman.
+ Chairman Spratt. Ms. Schwartz.
+ Ms. Schwartz. Thank you, Mr. Chairman.
+ Secretary Leavitt, good to see you again.
+ I wanted to follow-up on some of the conversation we had
+last week at the Ways and Means Committee, and I appreciated
+some of your answers then and thought maybe we could follow-up
+on some of them today. And this is really about the proposals
+around the additional coverage for the uninsured as you see it
+and some of the tax provisions.
+ And, again, I am going to try and do this in a sort of a
+yes, no and see if we can get to it and just to be clear what
+some of your intentions are and the Administration's intentions
+are. And there may be ways for us to find some common ground
+for us to move forward. And I certainly hope there are because
+we have a shared agreement that we need to get more people
+insured in this country.
+ I think you would start out by agreeing that there are
+currently about 46, 47 million uninsured Americans, this is
+without ongoing insurance in this country, and about 160
+million rely on employer-sponsored coverage.
+ So those are numbers, I think, we agree to. And that the
+President's tax scheme that, according to your own estimates,
+would still leave about 90 percent of those who are not insured
+now uninsured.
+ Secretary Leavitt. It is important to look at the two
+proposals the President has made together because as I go out
+to work with the State of Pennsylvania and the State of New
+Jersey and all those states that are currently working on
+proposals to increase the number of insureds, it is evident to
+me that they have this tax problem that they have to solve.
+ And if they had the tax problems solved and then combined
+it with their own access, the number of people who would
+actually gain coverage would be very high than if we just had a
+tax program. There will be a limited number of people who will
+better be able to afford it and will. But if you combine that
+with a basic affordable plan, you are going to see lots of
+people get insurance who currently----
+ Ms. Schwartz. Well, let us flesh that out if we may. You
+are using numbers like lots of people, and I think your own
+estimate is--and it sounds like lots of people actually if you
+want to talk about two, three, four million people will get
+some tax advantages, you know. And that is about six percent,
+though, of the number of uninsured.
+ So you are saying that is a great goal, that is what we can
+afford to do, that is all we can do? What sort of----
+ Secretary Leavitt. Well, how many would Governor Rendell's
+proposal in Pennsylvania cover?
+ Ms. Schwartz. Well, it is interesting. As you know, he is
+relying on some things that you are going to take away. One of
+them is the enhanced SCHIP reimbursement, and working with the
+federal government to be able to use the CHIP Program, you are
+taking away with one hand what you are offering with the other.
+And there is----
+ Secretary Leavitt. Well, that is one way to get----
+ Ms. Schwartz. Let me just say it is complicated and it is
+not going to be in one fell swoop. But the proposal that you
+are putting out, that the President has put out basically says
+that we have to reduce benefits to those who get health
+insurance through their employer.
+ And I think that you have stated yourself that one of the
+intentions here is that the President believes or you do that
+people are getting too much healthcare, that it is too
+comprehensive. You want to make sure that people get a basic
+coverage, but that you are going to reduce the tax advantages
+for a very comprehensive plan, one.
+ Two, you are going to put the people who are in the
+individual marketplace are going to have to find insurance on
+their own rather than in a group. And while you have said that
+the marketplace may respond to that, we do not, in fact, know
+that. It is a very expensive way to buy health insurance now.
+ And for families that have family incomes of maybe $50,000,
+even 60 or $70,000 before tax dollars to find seven, eight,
+ten, twelve thousand dollars out of pocket to buy health
+insurance in the expectation of maybe getting a tax deduction
+or tax credit later is really not realistic.
+ So that the number of people who will actually be helped by
+your proposal, even in Pennsylvania where our Governor is
+hopeful that they can do through waivers and a whole other
+combination of factors, cover more people, in fact, you are not
+helping them anywhere near as much as you might if you actually
+did not have to take away with one hand in order to give to
+another group.
+ Secretary Leavitt. It will not surprise the gentlewoman
+from Pennsylvania that I disagree with a number of your
+conclusions.
+ Ms. Schwartz. OK.
+ Secretary Leavitt. The principle here is, what we are
+discussing is what will government do to subsidize those in
+need. And the question is, is there more virtue in a thousand
+people having a basic affordable plan or five hundred people
+having a comprehensive plan and five hundred of them having
+nothing?
+ Now, I believe that----
+ Ms. Schwartz. So let me just stop you there. You are saying
+then that it is the Administration's intention to reduce
+benefits for people who have them because they get too much
+and----
+ Secretary Leavitt. It is not. It is not.
+ Ms. Schwartz [continuing]. And to make sure that--and maybe
+you are saying it is a good thing--is to help those who are the
+poorest maybe be able to get them the most. And I represent a
+lot of lower, middle-income folks who are struggling to be able
+to meet all their expenses, to pay health insurance if they
+can. They value their employer-based health insurance. It is
+not easy to buy it in the individual marketplace.
+ The fact is that you are really driving this to just those
+who are really--you are not really helping them. Let me just
+end it there. You are not really helping them enough to truly
+make a difference.
+ Secretary Leavitt. Well, may I point out that the
+President's proposal, his tax proposal alone would benefit 80
+percent of your constituents and every person in this country
+who is on an employer-sponsored insurance plan, and it would
+benefit 100 percent of those who have nothing.
+ Now, that sounds like serious help to me. And I would also
+point out that there are a lot of people in this country who
+end up leaving the employer-sponsored health insurance plans
+because of changes in their employment, because of changes in
+their circumstances, and they have nowhere to go. And this is
+about creating pooling where they have the ability to buy it in
+the individual market if they have to go there.
+ Ms. Schwartz. Let me just interrupt. I am sorry. I did not
+see any proposal around pooling. You are putting people into an
+individual marketplace and I have not----
+ Secretary Leavitt. Well, you have not looked at the
+proposal.
+ Ms. Schwartz [continuing]. Seen any of those proposals.
+Maybe you have them, but we have not seen any of them because
+if you do it without pooling, it is very expensive and
+sometimes unacceptable even with a tax deduction.
+ Secretary Leavitt. The proposal is that we create a basic
+affordable plan for everyone in a State and that would require
+a State to choose a method of developing funding for those that
+are chronically and seriously ill. That is why these two
+proposals have to be done together.
+ You cannot just say here is one proposal, here is another.
+The value of the plan is that we are working collaboratively
+with the states to actually get at solving the problem and
+having every American have a basic affordable policy.
+ Chairman Spratt. Mr. Smith from Nebraska.
+ Mr. Smith. Thank you, Mr. Chairman.
+ Mr. Secretary, I appreciate this opportunity.
+ I will begin by saying that when the proposal was newly
+released, I was not as big of a fan as I am now after learning
+more. And I do have to say that in many cases, even some
+employer-provided pooling of healthcare right now, adverse
+selection is taking place based on the generosity of some
+plans. And I do not say we should take that away necessarily as
+we should use more market-based principles with that.
+ So I appreciate, and I look forward to learning even more
+about it.
+ That being said, within the context of public health in
+general and the programs that states and the federal government
+offer, I hear concerns from the front lines of healthcare that
+many beneficiaries are not utilizing the appropriate channel of
+benefits perhaps.
+ What is being done perhaps to delineate the difference in
+services? Say the emergency room versus the clinic or walk-in
+urgent care, whatever the case might be. Are we able to provide
+the states the flexibility to address those so that consumers
+and beneficiaries can take advantage of what is most
+appropriate utilizing the most cost-effective manner?
+ Secretary Leavitt. Your seat mate, Mr. Alexander, spoke
+some of Louisiana. In Louisiana, 43 percent, almost double the
+number of people, almost triple the number of people go to
+emergency rooms to get the most basic of care because they do
+not have existence of those facilities there.
+ They have a two-tiered system where if you are employed and
+have insurance, you go to one system. If you are not employed
+and poor, you go to another. And the quality of care that they
+receive is not what it would be if they had access to
+preventative medicine.
+ And this is a good example. In Louisiana, the federal
+government sends them about a billion dollars a year. We could
+provide as a government assistance for virtually every person
+under 150 percent of the poverty line to have a basic
+affordable policy, have almost $300 million left over to pay
+for uncompensated care to support hospitals. And those people
+would have access to preventative care.
+ So our policies do impact that, and that is one of the
+reasons that the President feels so strongly about having 1,200
+new community health centers. That is where we can provide
+assistance, but those would be so much more viable financially
+if people walked in with an insurance card instead of to the
+community health center or to a clinic as opposed to going to
+an emergency room where they are not going to get that care. It
+is more expensive and less efficient, and they are not as
+healthy as a result.
+ Mr. Smith. OK. Thank you.
+ I yield back the balance of my time.
+ Chairman Spratt. Mr. Doggett.
+ Mr. Doggett. In our discussion about the plan that you and
+President Bush have to raise taxes, to provide more coverage
+for the uninsured, we discussed this last week. You said to Ms.
+Schwartz here as you told me last week what you thought were
+the purported benefits of your plan.
+ In terms of the purported cost, there are, as you said, 20
+to 25 percent of the people. I believe that is a little over 30
+million people, as I described it to you last week, who receive
+insurance through an employer, who will pay more taxes if your
+proposal is adopted.
+ Secretary Leavitt. On that day, the Chairman of the
+Committee asked me if the President's tax cuts were not made
+permanent, would I see that as a tax increase. I said if the
+federal government raises more taxes as a result, it seems like
+to me that might be considered a tax increase.
+ Mr. Doggett. Well, I am glad for you to take that up with
+him. I am asking a specific question. If your proposal is
+adopted, will there not be 30 million people plus in this
+country who receive insurance today through an employer plan
+who will pay more taxes the year after your plan is adopted?
+ Secretary Leavitt. There will be three who receive benefit
+and one that will not, and they will----
+ Mr. Doggett. Mr. Secretary, is it not true, under your
+estimates under the written documents that you proposed, under
+all the assumptions that you have outlined that over 30 million
+people--you can call it 20 percent. You can call it one in
+four. You can call it one in five. But 30 million plus people
+will pay more income taxes after your plan is adopted than do
+today?
+ Secretary Leavitt. I am prepared to stipulate to that to
+the extent that----
+ Mr. Doggett. You agree with that?
+ Secretary Leavitt [continuing]. If you will understand and
+stipulate that 120 million people will receive a benefit----
+ Mr. Doggett. I understand you and the President----
+ Secretary Leavitt [continuing]. And that the federal
+government will not collect a dollar in taxes more.
+ Mr. Doggett [continuing]. At the State of Union address
+want to talk about the benefits. I want to talk about the
+person who has got a wife with breast cancer, a child with a
+disability, or is a high-risk job. And of all the people for
+you all to propose a tax increase on, you are proposing a tax
+increase on that person because they happen to have a decent
+health insurance policy.
+ Secretary Leavitt. That is not true.
+ Mr. Doggett. And as I--well, it--you just----
+ Secretary Leavitt. It is not true.
+ Mr. Doggett. You just, quote, stipulated that you are going
+to raise taxes on 30 million people who----
+ Secretary Leavitt. Mr. Doggett, you continue to make that
+assertion. I would like to be clear that you believe that.
+ Mr. Doggett. Yes.
+ Secretary Leavitt. I would like it clear I do not.
+ Mr. Doggett. Well, you just stipulated. You do not want to
+say that it is a tax increase because you claim it is revenue
+neutral.
+ Secretary Leavitt. That is exactly what it is.
+ Mr. Doggett. Yes. But if I am the person paying the tax
+bill, it is sure a tax bill on me if I have that kind of
+insurance policy. I am going to be paying more taxes and so are
+30 million people.
+ And, indeed, the numbers actually go up now that I have had
+a chance to look at your ten-year figures because they show
+that by the end of the ten years, 40 percent, twice as many,
+will not be within the deduction area, and that is because you
+have chosen to treat people with good insurance differently
+than you treat the Medicare Advantage plans that you want to
+benefit under Part D. You let them adjust their benefits
+according to the CPI for medical expenses, but on these health
+insurance plans, you limit it to just the cost of living, do
+you not?
+ Secretary Leavitt. Well, I would assume then by your
+position that you would think it is a good idea for us to
+continue to have people who have to buy it from----
+ Mr. Doggett. Well, I am glad to answer questions from you
+after this hearing. But my question to you, sir, is, is it not
+true that you go up to 40 percent of the plans that are not
+within the standard deduction because you have applied a
+different and discriminatory cost-of-living index here
+different from what you do for the Medicare Advantage Program?
+ Secretary Leavitt. It is true that we believe that by
+targeting those increases at a lower rate that we can have a
+positive impact on medical inflation.
+ Mr. Doggett. But you do not want to do that for Medicare
+Advantage programs. In fact, the Commonwealth Fund came out
+with a study within the last couple of months that I am sure
+your office is familiar with that in year 2005 under Medicare
+Part D, you paid the Medicare Advantage programs almost a
+thousand dollars per beneficiary more than it cost us under the
+traditional Medicare.
+ You do not have any disagreement with that study, do you?
+ Secretary Leavitt. What I do have a disagreement with is
+that it is not about paying more. It is about getting
+integrated care and establishing a policy where we can have
+more----
+ Mr. Doggett. So you think you are getting value for your
+thousand dollars more per person?
+ Secretary Leavitt. We do, and we are also of the
+understanding or when I say understanding, we also have
+established policies in the law that over time would begin to
+reduce that difference. It was done as a deliberate policy
+matter to assure that we have integrated----
+ Mr. Doggett. Well, in order to----
+ Secretary Leavitt. Could I continue?
+ Mr. Doggett. Let me just ask you to respond at the same
+time since my time is expiring. Would you be in favor of
+applying the same cost-of-living index there that you now
+propose for this new tax on health insurance policies?
+ Secretary Leavitt. We are working to establish a policy
+with Medicare Advantage that allows for beneficiaries to have
+integrated healthcare, and we want it to be available in every
+part of the country because we believe that part of
+establishing this long-term benefit is integrated care.
+ And when you have integrated care and not just fee-for-
+service medicine where we are paying providers for how much
+they provide as opposed to the benefit, we think in the long
+term, and evidence bears this out, that the Medicare Trust Fund
+benefits and that those who are the beneficiaries themselves--
+--
+ Mr. Doggett. Is that a yes or no on whether you would treat
+the Medicare Advantage Program the same way you propose----
+ Secretary Leavitt. We would not.
+ Mr. Doggett [continuing]. This health insurance tax?
+ Secretary Leavitt. We would not.
+ Mr. Doggett. So you are going to keep giving them more
+benefit?
+ Secretary Leavitt. The law is what it is, and we support
+the current law.
+ Mr. Doggett. Thank you.
+ Chairman Spratt. Mr. Tiberi of Ohio.
+ Mr. Tiberi. Thank you, Mr. Chairman.
+ Governor, thank you for being here today.
+ Last week after the budget was introduced by the
+Administration, predictably I saw headline after headline
+claiming that there were deep cuts in Medicare and deep cuts in
+Medicaid in particular. Upon closer look, it appeared to me
+that every year in the budget, there is actually growth in both
+Medicare and Medicaid spending.
+ Can you comment on that?
+ Secretary Leavitt. The Medicare rate of growth right now is
+6.5 percent a year. If we made every change that we have
+proposed, we would reduce the growth rate from 6.5 percent down
+to 5.6 percent. It would sustain the viability or the solvency
+of the Medicare Trust Fund by just four years. But it is an
+important start.
+ Mr. Tiberi. Which was my follow-up question. I heard a lot
+over the last year about entitlement spending and particularly
+Medicare and Social Security.
+ When you look at those programs particularly under your
+jurisdiction, Medicare and Medicaid, what is your biggest fear
+over the next two years if we do not begin to tackle the
+problem with the growth of those programs?
+ Secretary Leavitt. I am trustee of the Medicare Trust Fund
+as well as Secretary of Health and Human Services. We now
+measure Medicare as a percentage of the entire gross domestic
+product.
+ I have a grandson that was born last year. When he reaches
+his father's age, it will have gone from 3.2 percent to 8.1
+percent. When he gets to be my age, it will be 14 percent. And
+I am not talking about the federal budget. I am talking about
+the gross domestic product of the entire country.
+ My biggest fear is that we will not make the logical small
+changes now that could prevent that from happening because we
+all know that will not occur. We will either have been
+eliminated from the economic playing field as a country or we
+will have changed it. And let us hope we do not change it too
+late.
+ Mr. Tiberi. Mr. Secretary, one of the programs that I
+support and initially opposed was the Medicare drug benefit. I
+opposed it initially because of the cost. I supported it after
+meeting with two surgeons in my district, heart surgeons, who
+convinced me that the way that the Medicare system was
+structured, we were incentivizing the wrong way. Rather than on
+preventative care and focusing on preventative care, we were
+paying them to do opening chest cavities and repairing hearts.
+ The number of the dollars that were told to us that were
+going to be spent on the drug benefit have come in
+significantly lower than what we were told. I believe after
+talking to physicians in my district that prevention does work.
+ How do we as policy makers here put more of the focus on
+preventative costs up front so we can save on the long-term
+cost both in our regular healthcare system and with respect to
+Medicare and Medicaid?
+ Secretary Leavitt. Well, prevention is the key. Frankly,
+the prescription drug benefit was an important step in that
+direction. I am sure as your cardiologist friends would tell
+you, Medicare reimbursed heart operations that would cost 150
+or $200,000 a piece that we could have prevented for $1,000.
+And we are now changing that.
+ I will tell you another very important change and that is
+beginning to gravitate away from the fee-for-service
+reimbursement and moving toward an integrated care.
+ You walk into a hospital, you ask a hospital administrator
+what is the most expensive--in fact, a hospital administrator
+asked me this. He said what do you think the most expensive
+medical device is in this hospital. I said I do not know. Is it
+a CAT scan? He said, no, it is a ballpoint pen in the hand of a
+physician.
+ We do not know in many cases the degree or cost that each
+individual--you put five people who are being treated for the
+same thing, they will end up with radically different treatment
+patterns and the result is much higher cost.
+ So having integrated care where you have the--we talked
+earlier before you came about quality measurement, cost
+measurement begins to create a market of competition based on
+quality. When we do that, we will begin to see quality go up
+and cost go down.
+ Mr. Tiberi. Thank you, Mr. Chairman.
+ Chairman Spratt. Thank you.
+ Mr. Andrews from New Jersey.
+ Mr. Etheridge from North Carolina.
+ Ms. Hooley from Oregon.
+ Ms. Hooley. Thank you, Mr. Chair.
+ It is nice to have you in front of Committee.
+ Secretary Leavitt. Thank you.
+ Ms. Hooley. It is interesting because the questions I am
+going to ask you are all bits and pieces of our healthcare
+system because, as you stated early, and I totally agree with
+you, we do not have a healthcare system. It is very much a
+piecemeal system. But since that is what we currently have, I
+am going to ask you those piecemeal questions.
+ This budget gives rural healthcare initiatives, it is a
+$142 million cut, and leaves 17 million for rural healthcare.
+That is going to be difficult because for many of our rural
+communities, that is the only healthcare they have. It is very
+hard to get doctors out there. It is very hard for the rural
+communities to get healthcare.
+ And I know you have increased funding for community-based
+health centers. I am happy about that. I think that is a very
+good thing to do. Again, it is nice for people in all areas to
+be able to go into a community health center. So I am happy
+about that.
+ But those community health centers do not specifically
+target rural communities. And, again, it seems like we
+continually spend less money in those under-served rural
+communities. I find it unacceptable.
+ So I do not know if you want to comment on that or not,
+but----
+ Secretary Leavitt. I mentioned the other day at the Ways
+and Means Committee that I governed a State for eleven years
+that had areas that were so rural you had to order a haircut
+out of the catalogue, let alone healthcare, and that delivering
+healthcare to those areas, I understand the difficulties of it.
+ We have made a substantial investment through the
+``Medicare Modernization Act'' to increase by $25 billion the
+amount going into rural healthcare. There are as a result of
+that areas where in this budget I felt like we have other ways
+of reaching the same goal. And so we have chosen to do it that
+way. But I am sensitive to the problem you are talking about.
+ Ms. Hooley. And, again, I just think 17 million for this
+whole country for rural healthcare is just too little.
+ Secretary Leavitt. Well, we spend a lot more than 17
+million for rural care. That is one program that we have
+chosen. We are actually proposing about a like amount to
+increase nurse visits that can in large measure be used in
+rural areas.
+ Ms. Hooley. I was talking to one of my hospital
+administrators and this is a nonprofit hospital. And he was
+worried about CMS's proposal released on January 18th that will
+cut $3.9 billion in Medicaid funding over the next five years.
+ The rule is designed to cut funding for public providers,
+but you know and I know that those cuts are going to be felt by
+all providers, including the not-for-profit hospitals. Those
+cuts are in addition to across-the-board cuts to hospital,
+hospice, ambulance providers.
+ Then you include the budget's failure to fund Medicare
+physician payment reform which will result in a payment cut of
+ten percent for physicians next year. And all of that adds up
+to a pretty dire situation for our safety net providers.
+ They are getting hit hard by this budget. And, again, I
+want to tell you that I think it is particularly difficult for
+rural providers.
+ Have you done anything specific to examine how these cuts
+are going to impact patient access to care if more providers
+stop accepting Medicare and Medicaid patients?
+ And let me just talk to you a little bit about that. Some
+of my communities literally, they will not accept any more
+Medicare patients. I mean, they cannot. They are filled up or
+they cannot afford to accept any more with the cuts.
+ What are we going to do about that? I mean, I am worried
+about our whole system because of the reimbursement rate, the
+way our system is currently.
+ Secretary Leavitt. Congresswoman, I worry about that too.
+It is one of the reasons that I am so passionate about making
+certain that there are Medicare Advantage plans available in
+every part of our country, because they provide an integrated
+care with the assurance that there will be physicians who are,
+in fact, able to treat Medicare patients and to accept new
+ones.
+ Now, I have already acknowledged that I think the way we
+reimburse physicians, it is kind of a witch's brew that nobody
+really understands. It is a very complicated system, and I
+would like to see a system that is different than that.
+ So I worry about the same thing. As you said, we have what
+we have. We need to migrate towards something better. But in
+the meantime, that is one way we can do it.
+ Ms. Hooley. Well, again, I find physician after physician
+has told me they just simply cannot afford to accept Medicare
+patients any longer. So I jokingly tell them this, but I am
+dead serious when I tell some of my friends who are my age,
+make sure when you get a new physician before you retire that
+you get a young physician because if yours retires on you, you
+will never find another physician to go to. And I think that is
+actually a really horrible message to give to people, but that
+is what I tell people.
+ Secretary Leavitt. I mentioned earlier that I am very
+anxious to see us find ways to make the business model of
+physicians, particularly small-practice physicians, viable. And
+part of that will be in developing a system that can gather
+information and reward high quality and at the best price. And
+if we do that, both physicians will be sound and able to make
+their businesses work and we can provide care.
+ I would say that there are few people with more to worry
+about in this area than me. I have 43 million beneficiaries,
+including my parents, who depend on that. And we will do all we
+can, but we have got to deal with how we finance this system in
+the long term. We have got to work on this because we cannot go
+on just every six or eight months trying to figure out how to
+keep it together for the next six or eight months.
+ Ms. Hooley. Thank you.
+ Chairman Spratt. Mr. Hensarling.
+ Mr. Hensarling. Thank you, Mr. Chairman.
+ Welcome, Mr. Secretary.
+ Secretary Leavitt. Thank you.
+ Mr. Hensarling. Just as a point of clarification, since we
+continue to hear the word cut used over and over and over, is
+the Administration proposing to spend more money on Medicare in
+this budget or less?
+ Secretary Leavitt. We will spend 5.6 percent more per year
+going over the course of the next----
+ Mr. Hensarling. And how about Medicaid?
+ Secretary Leavitt. Same, 7.1 percent.
+ Mr. Hensarling. And how about the life of the
+Administration? Have you spent more money on Medicare and
+Medicaid each and every year of the Administration?
+ Secretary Leavitt. Each year.
+ Mr. Hensarling. That is what I thought. I missed some of
+this hearing. When I walked in, I must admit I was a little
+incredulous by what I was hearing. I heard nothing from the
+other side except how tax relief has been the source of all of
+our problems and that we must increase taxes on the American
+people.
+ And now I hear voices from the other side of the aisle
+castigating the Administration for what they view as a tax
+increase. I am having a little hard time seeing how they can
+have it both ways.
+ How do you say we need tax increases and then when you
+purport to have a tax increase, all of a sudden, you are being
+criticized?
+ Furthermore, as I understand it, if there are people who
+will see a short-term increase in their tax liability, is it
+the poorest of Americans that might see such?
+ Secretary Leavitt. No. It will be the upper 20 percent of
+income. This would perhaps be the most progressive tax policy
+move that we will have seen in decades.
+ Mr. Hensarling. So you might be said to be taxing the rich;
+is that correct?
+ Secretary Leavitt. Well, it is not a tax increase because
+it does not gather any additional revenue. Those that it
+affects----
+ Mr. Hensarling. Well, I agree with you, Mr. Secretary. I
+understand that this is----
+ Secretary Leavitt. I might add that----
+ Mr. Hensarling [continuing]. Revenue neutral.
+ Secretary Leavitt. I might add that those who are in that
+situation have options. They----
+ Mr. Hensarling. Well, indeed, there is a way that they can
+align their affairs such that they do not have any increase in
+their tax liability; is that correct?
+ Secretary Leavitt. That is correct. They can.
+ Mr. Hensarling. Well, I for one want to congratulate you
+and the Administration for this policy. I certainly reserve the
+right of final judgment until I see all the details.
+ But I would hope that what we would do as a Congress is try
+to come together and work in a bipartisan fashion to find ways
+to make healthcare more affordable, more portable, more
+accessible, of high quality and with patient choice. And, yet,
+we have had this odd quirk in federal policy where we
+essentially have third parties buy our health insurance for
+you.
+ To the best of my knowledge, we do not have analogous
+program for letting third parties buy our homes or our
+automobiles. Are you aware of any other federal policy that----
+ Secretary Leavitt. I am not.
+ Mr. Hensarling. Well, again, I would like to congratulate
+you for taking a very bold step forward that would empower
+millions of self-employed people and not to mention people who
+are now for all intents and purposes forced to take the health
+insurance of their employer's choice and empower them to go out
+and buy the health insurance that is best for them and their
+families.
+ It is a very empowering thing and it puts them in control
+of their healthcare. I frankly think it is one of the greatest
+steps forward I have seen to improve healthcare, not only its
+quality, but its affordability.
+ Mr. Secretary, prior to you coming to our Committee, we
+heard from the head of CBO, the head of OMB, and I believe the
+Secretary of the Treasury, and I do not care to put words in
+their mouth, but I think they have all said something along the
+lines of the number one fiscal challenge of this nation is to
+find out ways to reform entitlement spending because if we do
+not, within a generation, some models differ, we are looking at
+either, A, having no federal government to speak of except
+Medicare and Medicaid and Social Security or a tax increase of
+somewhere between 50 and 100 percent on future generations.
+ If people refuse to embrace entitlement reforms and
+entitlement spending, imagine, if you would for me, please,
+what does the world look like if the next generation is saddled
+with a new tax burden of between a 50 and 100 percent increase
+and what does that do to their healthcare?
+ Secretary Leavitt. I mentioned a little earlier today, but
+it bears repeating, that I have a grandson who today lives in a
+world where 3.2 percent of the gross domestic product is
+Medicare alone. If you add Medicaid to that, it about doubles
+it. When he becomes his father's age, it will be eight percent
+of the gross domestic product. When he becomes my age, it will
+be 14 percent of the entire economy.
+ Now, it does not take a lot of imagination to recognize
+that you cannot sustain a competitive economy with that kind of
+expenditure going into one sector.
+ Mr. Hensarling. Thank you, Mr. Secretary. I see my time is
+up.
+ Thank you, Mr. Chairman.
+ Chairman Spratt. Mr. Andrews of New Jersey.
+ Mr. Andrews. Thank you very much, Mr. Chairman.
+ Thank you, Mr. Secretary.
+ I want to ask you about the allocation of the benefit that
+you are proposing with respect to covering the uninsured with
+healthcare.
+ First of all, do we have any data on the--I think you used
+the phrase 20 percent of those whose health insurance plans
+have a value of more than $15,000 for a family and who,
+therefore, would pay taxes on the value of the healthcare
+benefit that exceeds $15,000.
+ Do we have any income distribution data about who those
+people are that would get that tax increase?
+ Secretary Leavitt. We do.
+ Mr. Andrews. What does it look like?
+ Secretary Leavitt. If you divide the economic spectrum into
+five parts, they are the upper 20 percent.
+ Mr. Andrews. Is everyone in the upper 20 percent?
+ Secretary Leavitt. Well, just like any other statistic,
+there are those that are not, but on balance, they are in the
+upper 80 percent.
+ Mr. Andrews. Could you supplement the record with a written
+answer to that question for us so you could show us? What I am
+specifically interested in is the income distribution by either
+adjusted gross income or gross income.
+ Secretary Leavitt. The Department of Treasury has that
+information. I would be happy to----
+ Mr. Andrews. If you would supply that.
+ Second thing I want to ask you is under this plan, let us
+say we have a person who is uninsured--well, let me just give
+you this statistic. Forty-one percent of the people who make
+between 20,000 and $40,000 a year are uninsured according to a
+recent study. Forty-one percent of people's incomes are between
+20,000 and 40,000.
+ Say if someone has an income of $30,000 a year, their gross
+income, and they are a renter and they say they have two
+children and their adjusted gross income with exemptions and
+whatnot is down at about 23,000, tell me how this proposal
+affects them.
+ Secretary Leavitt. It is clear that the benefits of this
+proposal alone would not provide an adequate assistance for
+them to buy health insurance.
+ Mr. Andrews. What would it provide though?
+ Secretary Leavitt. Well----
+ Mr. Andrews. A person with, let us say, a $23,000 AGI who
+has no health insurance, what is the value of this proposal?
+ Secretary Leavitt. Well, if they had no health insurance,
+it would not benefit them.
+ Mr. Andrews. So they get nothing?
+ Secretary Leavitt. That is right.
+ Mr. Andrews. So in my State, for example----
+ Secretary Leavitt. Get nothing now.
+ Mr. Andrews. That is right. In my State, a family health
+insurance policy may cost 12, 13, $14,000 a year on the
+average. So the value of this tax benefit to someone who cannot
+afford to buy the family policy is really nothing?
+ Secretary Leavitt. As you will recall earlier, I mentioned
+that you cannot look at this as one proposal. There are two
+proposals. The second would be to have the federal government
+assist the states in closing the affordability gap----
+ Mr. Andrews. How much money are you putting into that----
+ Secretary Leavitt [continuing]. Just like the ones that----
+ Mr. Andrews. And how much money are you putting into that
+proposal?
+ Secretary Leavitt [continuing]. Just like the ones you have
+described.
+ Mr. Andrews. I understand.
+ Secretary Leavitt. We are working now with the states to
+develop a proposal. We would like to work with the Congress in
+the same way. It is clear to us that we have to, first of all,
+assure that there are basic plans available and, second, that
+they are affordable. An important part of making them
+affordable would be to have this tax equalization. It is
+indefensible, but we----
+ Mr. Andrews. How much is budgeted toward that initiative?
+ Secretary Leavitt. That has not been budgeted yet because
+we want to work with the Congress and with the states to
+determine how it should be developed.
+ Mr. Andrews. Well, you say yet. I mean, is there a place
+holder? Is it correct to say that in the proposal before us,
+the amount is zero right now for that?
+ Secretary Leavitt. The proposal has not yet been made, but
+it is very clear from what the President said is he wants to
+work with the Congress to do two things. One is to provide
+supplement to states to close the affordability gap to be able
+to help exactly the person that you are talking about be able
+to afford policy and then close the gap on the tax issue.
+ Mr. Andrews. My understanding is that the revenue loss you
+are projecting for the first five years of this 20/80 plan is
+$126.4 billion. Why did we not take the $126.4 billion and put
+it into SCHIP? Would that not have been a more rational way to
+try to get to the people who are uninsured?
+ Secretary Leavitt. We do not think so. We think----
+ Mr. Andrews. Why not?
+ Secretary Leavitt. Because we think it is the
+responsibility of the federal government to assure that if a
+person is elderly, disabled, if they are poor, if they are a
+woman who is pregnant, if they are a child needing protection,
+it is the responsibility of the federal government to assure
+that they have health insurance.
+ And we do that through Medicare, Medicaid, and SCHIP.
+Everyone else, we believe that it is better for the states to
+assure that there is a marketplace that will provide a basic
+affordable policy and that we should do two things in the
+federal government.
+ One is to resolve the indefensible position that we
+currently have, which I assume you would want to change, where
+those who----
+ Mr. Andrews. My time is expiring. My own observation is
+that this is a continuation of the indefensible, an
+exacerbation of the indefensible because you are taking 126
+billion in tax expenditures and not putting it toward the
+people who are most in need.
+ Chairman Spratt. Mr. Ryan has a question for clarification.
+ Mr. Ryan. Rob, I want to ask a clarifying question of
+Secretary Leavitt because I think there may have--at least I
+got confused in a stage of it.
+ If a person has an adjusted gross income of $23,000, you
+said no value whatsoever would come to them.
+ Secretary Leavitt. They have no insurance. They have to buy
+insurance as a condition to get the benefit.
+ Mr. Ryan. OK. But their tax benefit would be--because this
+refund--this is deductible. The deduction applies to FICA taxes
+as well, correct?
+ Secretary Leavitt. It does, but they would have to buy
+insurance in his example that they do not have any insurance.
+ Mr. Ryan. OK. So they buy insurance. Then the deduction in
+that person's case would basically just apply to what they pay
+in FICA taxes, correct?
+ Secretary Leavitt. That would be true if their adjusted
+income was what you suggested.
+ Mr. Ryan. You would not have--yeah. OK. You would not have
+an income tax liability at that AGI on income taxes?
+ Secretary Leavitt. That is right.
+ Mr. Ryan. You would have a FICA tax liability and so the
+deduction would just be the value of the deduction on FICA
+taxes? If then you bought insurance, it would reduce the cost
+by that amount? Is that basically how you calculate it?
+ Secretary Leavitt. That is correct.
+ Mr. Ryan. OK. Thank you.
+ Mr. Andrews. Will the gentleman just yield?
+ Mr. Ryan. Yeah, sure.
+ Mr. Andrews. That is sort of my point.
+ Mr. Ryan. Yeah. No. I just----
+ Mr. Andrews. Someone in that position, A, does not get any
+benefit if they do not buy insurance, which I do not think they
+can afford to do. And even if they did----
+ Mr. Ryan. It does not cover the cost.
+ Mr. Andrews [continuing]. Their marginal rate is so low
+that it is really a pretty minimal subsidy.
+ Thank you.
+ Chairman Spratt. Mr. Porter from Nevada.
+ Mr. Porter. Thank you, Mr. Chairman.
+ Mr. Secretary, it is good to see you again. Thank you very
+much.
+ Secretary Leavitt. Thank you.
+ Mr. Porter. First, at the 2,500 foot level in Nevada, you
+know, in prior campaigns, I heard frequently from seniors how
+the Medicare prescription drug benefit was going to damage
+their current health plans. We had thousands of phone calls, of
+course funded by political action groups.
+ I just want you to know that many of those seniors that
+called back then are now saying thank you, and they felt that
+they were not necessarily given the facts.
+ But in Nevada, we have close to 90 plus percent of our
+seniors have signed up. A lot of that has to do with your
+efforts and many, of course, volunteers helping in Nevada. But
+I get calls frequently from these seniors that really
+appreciate the program. So I wanted to say something very
+positive.
+ Almost 90 some thousand of those seniors are in my
+district, and certainly it is not perfect and certainly it has
+challenges, but I want to send you that message. Many of those
+folks that were complaining are now telling us it is working
+and they appreciate it.
+ On the child welfare side, we have had a chat in the last
+week, and your staff has been very responsive to a very serious
+emergency in Nevada on child welfare. And I want to thank you.
+ Now I want to get back to 40,000 feet for a moment. A few
+weeks ago, we heard that, in this Committee, that close to $600
+billion, and I could be off on the numbers, but close to $600
+billion is being spent a year on child welfare programs.
+ Now, there is, of course, variation of number of children
+that are on welfare, and I realize every one of these children
+has a name and a family and a challenge, so I do not mean to
+discount them individually.
+ But there is somewhere between 12 and 20 some million
+children a year that are in poverty. If you divide those kids
+into 600 billion, that is almost 30 to $50,000 a child a year
+is being spent currently by the federal government.
+ Now, I can say facetiously we should give each child a
+check for $50,000 a year, but we know that is never going to
+happen, nor should it.
+ But what can we do to make sure that this 20 to 50,000, and
+it is appalling to me that that much money is being spent and
+not reaching the child, what can we do to help cut through the
+red tape, through all the bureaucracy so these kids can benefit
+from this massive budget, because this is not a question of we
+need more money? And there is a lot of programs that we do. It
+looks like we need to make sure that that child gets that
+money.
+ Is there anything else that we can be doing to make sure
+these kids reap the benefit?
+ Secretary Leavitt. Without validating a specific number----
+ Mr. Porter. Absolutely.
+ Secretary Leavitt [continuing]. Let me just acknowledge
+that having served as Governor for eleven years and managed
+these programs, we have done remarkably well in this country
+with a change of direction.
+ We concluded that we ought to turn the responsibility for
+management of the programs over to the State. We allowed them
+to have the flexibility. We began to create requirements that
+would require people to work and begin to integrate in a way
+that would provide the building of lives and the fostering of
+self-reliance as opposed to the perpetual maintenance.
+ I believe that that was a sound policy. I think it is a
+sound application in the area of healthcare as well as welfare.
+ Mr. Porter. And, again, not to discount the child and his
+or her trauma, we looked at government agencies last year and
+we have six or seven agencies looking at frozen pizzas. You
+know, one looks at pepperoni and one looks at cheese, one looks
+at sausage.
+ I just hope there is some way that there is not
+duplication, overlapping of these services. And I appreciate
+what you are doing to try to give the states more control.
+ But the factor remains is that money is still not getting
+to the child, and I appreciate your efforts in making sure that
+we can channel those monies to the right place and not
+duplicate services. And I know you are in a unique situation.
+You suggest any kind of cut anywhere, it sounds like you are
+cutting an essential program.
+ I am assuming that some of these things that you are making
+an adjustment to are because of overlaps and because of
+duplication; is that not correct?
+ Secretary Leavitt. One of the guidelines I gave the
+preparers of the individual decisions that needed to be made
+was that we ought to look for places in the federal government,
+and there are many, where because of siloed budgets and because
+of siloed approaches, there are more agencies of government
+dealing with the same problem than one. And it happens a lot.
+ And so there are instances where we have eliminated
+programs because they were being covered by other places. And
+there would be those who champion the program that is being
+reduced or eliminated, but if you are going to have a deficit
+reduction budget, you have got to deal with those priorities.
+ Mr. Porter. Thank you, Mr. Secretary.
+ Thank you, Mr. Chairman.
+ Chairman Spratt. Mr. Etheridge of North Carolina is not
+here, I do not believe.
+ Mr. Bishop.
+ Ms. Bishop. Thank you, Mr. Chairman.
+ And thank you, Mr. Secretary.
+ I have some statistics I want to share with you and then
+ask you a question. I represent a district in New York. In
+2003, the HMOs in New York operated at an aggregate profit of a
+billion dollars. The hospitals operated at an aggregate loss of
+391 million.
+ In 2004, the HMOs had an aggregate profit of 847 million,
+the hospitals a loss of 127 million. In 2005, the HMOs had a
+profit of 1.1 billion. Hospitals lost only 95 million. And over
+that same period of time, the HMOs increased their premiums on
+an annual basis by about ten percent.
+ So my question is, why when we are looking to bend the rate
+of growth in the Medicare program and, as I understand it,
+there will be some $66 billion worth of lost payments over the
+next five years and that those payments will be principally
+taken out of the providers, why is it that we are taking the
+Medicare payments out of the providers and keeping in place the
+subsidies to the HMOs?
+ Secretary Leavitt. I am not expert, Mr. Bishop, on New York
+hospitals, but I know enough because of my interaction with
+Governor Pataki and now Governor Spitzer on New York hospitals
+to know that there were too many of them and that their
+business model was floundering as a result and that you have
+been through a so-called BRAC commission-like process. And we
+have helped in being able to reduce the number of beds and
+hopefully increase the profitability.
+ I would argue that there may be a difference in the cases
+of the hospitals in New York and HMOs because the care has been
+managed more carefully, and we all aspire for that to happen
+with the hospitals in New York as well.
+ Ms. Bishop. More to the point of my question, though, why
+do we continue to subsidize entities that have such a healthy
+profit margin at the expense of entities that even if they are
+exceptionally well-run, at full capacity, are struggling to
+operate at a break even?
+ Secretary Leavitt. Well, first of all, I am not able to
+validate the statistic. I will assume that you got it from a
+credible source, but the principle obviously here is that we
+desire to see integrated care and we want to see it everywhere.
+We want to see it in the rural areas that we had just spoken
+of.
+ And this system was established over time working our way
+starting with a subsidy and then moving out the way we do, and
+we are having success. We have over seven million people now
+that are on Medicare Advantage, and they are very happy with it
+and they are receiving excellent care and they are not having
+trouble getting a physician on Medicare.
+ Ms. Bishop. But don't those Medicare Advantage plans cost
+us more than traditional fee-for-service Medicare recipients?
+ Secretary Leavitt. We believe that having integrated care
+and having them available in every part of the country
+ultimately provides our system with an advantage that we hope
+to preserve.
+ Over time, built into the law is the ability to normalize
+those payments in a fashion that will assure we have a robust
+system of integrated care.
+ Ms. Bishop. Let me switch the subject. Head Start, arguably
+the central domestic public policy initiative of this
+Administration has been No Child Left Behind. There is a fairly
+substantial body of evidence that suggests that if you get kids
+started right, the chances of them succeeding as they go
+through the system is increased over those who do not have in
+this case early childhood education or pre-k education.
+ Why is it if that is the case, and if we are all agreed
+that we all want students performing at grade level, we all
+want to eliminate the achievement gap between rich kids and
+poor kids and White kids and African-American kids, why is it
+that we would not be increasing our investment in a proven
+success story like Head Start?
+ I mean, you talked before, and I do not mean to be
+disrespectful, but you talked before about siloed decision
+making. Is this a case of siloed decision making where we have
+one program that has a set of goals and another program that
+might contribute to those set of goals, but because of some
+financial imperative, we are not funding it to the extent that
+it should be funded?
+ Secretary Leavitt. It is a good example of siloed decision
+making, but not perhaps in the same way you have thought about.
+It would be in my judgment lots better if we had the ability to
+coordinate what goes on in Head Start with what goes on in our
+schools, our public schools much closer. And there are clearly
+silos there.
+ We send Head Start about $8 billion a year. It is a very
+important program. Do we believe it could be more efficient? We
+do. And I did protect it from any significant cuts. But in a
+deficit reduction budget, we concluded that we could reach
+greater efficiency there and that we are going to work with
+them to achieve it.
+ Ms. Bishop. OK. Thank you, Mr. Secretary. Appreciate it.
+ Chairman Spratt. Mr. Garrett.
+ Mr. Garrett. Thank you, Mr. Chairman.
+ Thank you, Mr. Secretary, for being here for all this time.
+Appreciate it. And I appreciate the efforts that you and the
+Administration are making in a difficult area.
+ As previously indicated, we have a number of people coming
+before us earlier testifying to the dire situation that we may
+face or will face when it comes to mandatory spending. And I
+would hope that we have bipartisan agreement that we are facing
+that. Although at times, I am not quite sure that we are even
+yet to that point of agreeing that if we do not do something
+down the road, we will face that problem.
+ Let me just make this one observation. When these proposals
+come down from the Administration, what happens then, as you
+are probably aware, is the healthcare community in general gets
+whipped up, if you will, about the dire warnings, right or
+wrong, that may be coming down the track, whether it is the
+hospital community or the provider community. And then we as
+members hear from them in our office.
+ Part of that is because while I again applaud the attempts
+to make some overall structural changes that you have in here,
+you address the subsidies to upper income retirees for services
+under Medicare Part B and D, and also we talked about the
+standard healthcare deduction. Part of the savings does come, I
+will use the word tinkering around the edge with regard to
+provider services.
+ I come from the State of New Jersey where it is the high
+cost of healthcare, high cost of living in general. Hospital
+funding is an issue. Obviously you can appreciate it is
+difficult in our area.
+ The nonpartisan Medicare Payment Advisory Committee
+recently voted and recommended to Congress that hospitals
+receive a full inflation update in 2008 stating that the
+Medicare margins were at the lowest levels recorded.
+ Likewise, we can hear from other providers in the State,
+and they would look at these things and say we should not be
+tinkering around the edge. I guess I would suggest that we may
+need to make some broad changes than just addressing that.
+ So that would be my first question is whether we should be
+going in that direction. And, secondly, it is hard to get
+around some of these numbers and get your hands around them.
+ My understanding is, according to the Medicare trustee, the
+unfunded liability of Medicare totals $35 trillion over the
+next 75 years. I have a hard time, quite honestly, getting my
+hands around a billion dollars. Well, I would never get my
+hands around a billion dollars. But if I could, 10,000 $1,000
+bills stacked up in front us would equal a billion dollars, and
+we are talking about an unfunded liability of $35 trillion.
+ Are we doing enough, I guess, is the question to the
+equation of addressing it with this legislation or should we be
+doing even more?
+ And the last question goes to the suggestions that come
+from the other side of the aisle, and that is could we not just
+simply maybe use some of the savings that you are talking about
+in here and throw them into programs like increase funding for
+SCHIPs or increase funding for some of these other programs
+that are already on the books? But if we did that, would that
+actually bring us to the solution that we see in the charts and
+that is addressing the long-term dire predictions that we have?
+ Secretary Leavitt. Congressman, the healthcare financing
+system is--I referred to it earlier as a sort of witch's brew
+that nobody fully understands. I have spent a lot of time
+studying it as have others.
+ There are those who believe that there just is not enough
+political will in the world to change healthcare and the way it
+is financed. I would argue that the inverse of that may be
+true.
+ There is just too much political will because every time a
+proposal like the one that I am making today comes onto the
+table, everybody just unholsters their political will and aims
+it at each other. And there is an ongoing proprietary ideologic
+debate that just keeps us from making any change.
+ I am of the belief that the only power strong enough to
+begin to reshape the financing of our healthcare system is a
+market where people are able to make decisions based on quality
+and cost comparisons and that when competition based on value
+begins to happen, it begins to allow the hospitals that are
+efficient to emerge.
+ It allows those that are not--we can make deliberate, overt
+decisions about whether or not we ought to subsidize them as
+opposed to the covert subsidies that we currently have in place
+that no one understands, that no one accounts for, that no one
+is in a position to predict the outcomes. Whenever there is a
+proposal like this one comes on the table, the outcome is
+predictable.
+ Now, I am of the belief that if we construct a system of
+healthcare that is based on competition, on value, that we will
+begin to see it rationalize. It will not happen over night.
+ But, you know, you ask about Med Pac. I made a
+recommendation that we take the full so-called market basket
+and we cut it by .65 percent. I had a rationale for doing that.
+I am not sure if the market would have guessed that exactly,
+but I believe strongly that if there were productivity there,
+that other people would begin to mirror that and we would see
+that would be a pretty good estimation. I am saying a lot more
+than you asked.
+ Mr. Garrett. No. That is fine.
+ Secretary Leavitt. And I am enjoying saying it and the time
+is up.
+ Mr. Garrett. I appreciate it.
+ Chairman Spratt. Mr. McGovern of Massachusetts.
+ Mr. McGovern. Thank you, Mr. Chairman.
+ Thank you, Mr. Secretary, for being here.
+ I want to take my five minutes to talk about the issue of
+hunger in America. I think we cannot talk about any health or
+education issue if we do not first talk about hunger amongst
+America's children.
+ And this is, as you know, a very serious issue, a very real
+issue all throughout our country. There is not a community in
+America that is hunger free. We are the richest nation in the
+world, and I think that is something that every one of us in
+this Congress and every one of us in government should be
+ashamed of.
+ If we want to make sure that no child is left behind, then
+we need to make sure that all of our children are fed,
+especially our youngest children. If we are going to make sure
+that we have healthy children ready and able to learn, then we
+must be much more serious about eliminating child hunger and
+malnutrition in America.
+ Yet, when I look at this budget, to be honest with you, I
+do not see the kind of bold commitment that I think is called
+for, and it is a challenge for you and it is a challenge for
+this Congress.
+ When my colleague, Mr. Bishop, talked about Head Start,
+well, the fact of the matter is Head Start has been basically
+flat funded since fiscal year 2003. And in the fiscal year 2008
+budget, it is actually cut by $100 million.
+ Now, you said at the beginning that you protected the
+program. I would just respectfully differ with you on that. The
+House Committee on Education and the Workforce estimates this
+year's budget means Head Start, early childhood education
+programs would experience a 13 percent cut in funding in real
+terms since 2002.
+ And, you know, we can argue about the efficiency of the
+program, and that is a nice argument for us to have here, but
+the impact, you know, for many of the children served by these
+programs, I mean, Head Start provides the only meals that they
+will receive on any given day. And for low-income and poor
+families, Head Start and Early Head Start is the only access to
+child care.
+ You can say, well, we are not really targeting food and
+feeding these kids, but we have stories here from people all
+across the country who are involved in these programs, they are
+cutting back on the days of service or they are cutting back on
+transportation. Well, if you cut back on the days of service or
+you cut back on transportation, so a child cannot get to one of
+these programs, then you are literally taking food out of that
+child's mouth.
+ As for our senior citizens, there has been a lot of
+questions already here and a lot of discussion about the
+proposals on Medicare and Medicaid. But we all know that one of
+the most fundamental issues facing the low-income elderly is
+making sure that they are adequately fed.
+ Now, from our own experience with our elderly family
+members, everyone on this Committee knows that many
+prescription drugs do not work correctly if they are taken on
+an empty stomach. And some drugs will actually do you grave
+harm. We also know that many senior citizens require special
+diets.
+ I was in Massachusetts yesterday and was talking to some
+doctors who work in an emergency room at one of our major
+hospitals who was telling me about the number of senior
+citizens that they treat in emergency rooms who have severe
+illnesses because they are taking their prescription drugs on
+an empty stomach because they do not have the food. They are
+making choices, and they do not have enough to be able to have
+the meals that they need to remain healthy.
+ Yet, when I look at the budget between HHS and USDA, this
+budget eliminates or reduces or further restricts eligibility
+in nearly every one of the cornerstone programs that provide
+food, meals, nutrition, or income support to senior citizens.
+ I guess my point is that we all talk about the numbers
+here, about how we are trying to consolidate programs and be
+fiscally responsible, but a hungry child most likely will end
+up being an unhealthy adult. A hungry child will not be able to
+learn in school. A senior citizen who is shortchanged on their
+food and is taking prescription drugs on an empty stomach gets
+all these other illnesses that we end up all paying for. The
+societal costs are great.
+ I think what troubles me about what is before us here, I
+mean, the cuts in Head Start, the ``Older American's
+Act,''Title 3 programs, some of the Social Services and other
+income support programs for children and elderly, I mean, the
+reduction and the cuts, however you want to call them, I think
+in the long run will end up costing us more.
+ And I am just trying to figure out, you know, what does it
+take, I mean, for the Administration or for the Congress here,
+for that matter, I mean, to deal with the issue of hunger head
+on? I mean, it is a huge problem. Not a community in America is
+hunger free. And, yet, it hardly gets any discussion, and this
+budget, I think, makes the situation worse. I would just be
+interested in your response.
+ Secretary Leavitt. Mr. McGovern, I am not for hunger and I
+do not think----
+ Mr. McGovern. And nobody ever is. I mean----
+ Secretary Leavitt. I can tell you, I will offer this. As
+Governor and as Secretary of Health and Human Services, you
+brought up Head Start. I have been in a lot of Head Start
+programs. I believe it is a good program. However, I believe we
+could do better with the program if we were coordinating it
+closely with children and with, rather, schools, with our
+public schools, and with the school lunch programs and all of
+the other programs that go into it. We do not.
+ And I answered the question earlier. I believe we can do
+better with what we have. We are making a substantial
+investment in Head Start. We are reducing budgets. We are in a
+position of having to make hard decisions between different
+competing priorities, and this is the way I made them. And I
+respect what you have said.
+ Mr. McGovern. No. And I appreciate your answer, Mr.
+Secretary. I guess my point is that, you know, as we have this
+debate about how we can better run Head Start, there are Head
+Start programs that are cutting back on services. And there are
+children who cannot take advantage of those programs and there
+are children going without food.
+ And I would think that there needs to be more coordinated
+effort to deal with the issue of hunger, not only amongst
+children, but amongst senior citizens. I mean, you must be
+hearing the same stories I am from doctors who are talking
+about the prescription drugs--no matter what you say about the
+prescription drug bill, that is great, but, you know, if senior
+citizens are going without food and we are not providing them
+the necessary safety net to be fed properly to be able to
+support themselves, then we have a problem.
+ Secretary Leavitt. One of the real privileges that my
+service in the federal government has provided was an
+opportunity for almost a year to travel all but two states,
+Hawaii and Alaska, and most of them, many times, and to go into
+senior centers, to go into churches, to go into the--I saw the
+fabric of compassion that is available or is established for
+people because we care about our neighbors, we care about our
+family members.
+ And the federal government plays an important part in that,
+but we are not the only part of it. And the question before us
+today is, what is the right thing for us to do with the limited
+number of dollars we have in order to weave it into the fabric
+of our community.
+ And, you know, could we do more? Yes. With the available
+monies that we are dealing with here, this is how I would
+propose to do that.
+ Mr. McGovern. I appreciate your answer, Mr. Secretary. I
+would just close with, you know, I appreciate your statement
+that you are not for hunger, but, as I said, nobody is. It is a
+real problem. It is a growing problem, one that for whatever
+reason, we do not want to address.
+ I will just say one last thing, and that is when you go to
+a food bank in any State in this country, what you will see is
+the group in terms of growing clientele are working families.
+And it is a problem that is getting worse. And I think we need
+to do something about it. But I appreciate your answer.
+ Secretary Leavitt. Thank you.
+ Chairman Spratt. Mr. Bonner.
+ Mr. Bonner. Thank you, Mr. Chairman.
+ Mr. Secretary, I am sorry. I just got here late, so I will
+try to be careful with my questions because I am sure you have
+probably had two or three times at the apple.
+ But one that if you could repeat the answer if you have
+been asked it. It seems that we are constantly putting a band-
+aid on the physician reimbursement issue. And I was wondering
+if you could share one more time.
+ Is there a permanent fix out there so that we do not have
+to at the end of each year cobble together an agreement that
+basically keeps physicians at a level playing field, does not
+allow them the flexibility to grow and take advantage of the
+technology that is out there today?
+ Secretary Leavitt. I believe there is one and we need to
+find it because this doing it every six months is an exercise
+that need not happen. I do not have a formula for you today,
+but I will tell you that the future needs to include the
+capacity for us to compensate physicians and hospitals at least
+in some measure on the basis of not just the quantity of
+services they provide but the outcomes and the quality of the
+services they provide. Now, physicians want to provide quality.
+What they want is to be measured fairly.
+ I have spoken at length today about a system of healthcare.
+I do not believe we have a system of healthcare. We have a
+sector of healthcare. We have got to shape it into a system, a
+system that has electronic medical records that will allow us
+to gather the needed information and to find quality measures
+and define what quality care is with the help of the medical
+community.
+ Once we begin creating a system of competition based on
+value, then we will have the capacity to solve the so-called
+doc fix on a more permanent basis. Frankly, there are parts of
+that we are not very good at yet, but we are getting better at
+it and we are spending a lot of time and energy not just in
+government but within the medical community, within the
+technology community, within the large payers.
+ I reported before you came that we will have 60 percent of
+the entire healthcare marketplace by April who will have
+committed themselves to four important cornerstones of shaping
+a system. Once that system is in place, and I do not believe we
+are a long ways off from where we will start to see its early
+manifestations, we can not only solve the SGR problem, but we
+will be able to begin managing our healthcare expenditures in a
+more rational fashion.
+ Mr. Bonner. Let me try to get a couple more questions in.
+You were in Mobile, Alabama where I am from during the selling,
+if you will, of the Part D Program. A quick assessment on your
+feeling. I know we had some bumps early in the journey, but the
+folks in my district, by and large, the calls I get are very
+appreciative of the new program.
+ Secretary Leavitt. May I just say that this was a great
+American moment. This was not just about the creation of a new
+program. This was America rallying together.
+ I had the personal privilege of seeing, as I mentioned
+earlier, in church basements, in parking lots of shopping
+centers, in senior centers, in hospitals, in clinics, in
+schools, and people going door to door. I saw family members
+who stepped up and helped. In the course of a six-month period,
+we saw 90 percent of the people in this country who are
+eligible sign up for a new benefit.
+ And now a year later, we find that 80 percent of them are
+happy with the decision they have made. And the good news is
+the 20 percent who are not have a choice where they can go out
+and improve their situation.
+ We saw billions of dollars being saved over what was
+originally planned. A hundred and thirteen billion dollars in
+this budget that is reduced because of the efficiencies that
+are being developed. We have been able to see seniors saving an
+average of $1,200. Most important, we are seeing seniors who
+are getting prescription drugs who did not have them before.
+ This was a great American moment. It was not simply about
+the victory of implementing a program. Well, this entire
+country rallied together in a way that allowed this to occur,
+and I am not sure it could have happened in any other place in
+the world besides this country.
+ Mr. Bonner. All right. Last question from me. I have asked
+the previous witnesses the last few weeks, the Director of the
+CBO and head of OMB and the Secretary of the Treasury, a tax
+related question, that if we in Congress allow the tax cuts of
+2001 and 2003 to expire, is that a tax cut or a tax increase. I
+will not ask you that question. But some of the candidates
+running for President this year for 2008 are already talking
+about the need for universal healthcare. You said in your
+statement there will never be enough money to satisfy all the
+wants and needs and we had to make some tough choices.
+ Do you have any idea how much money you all would need in
+the Department to provide universal healthcare coverage to the
+American taxpayer and could you do it in your existing budget
+or would new revenue have to come in to pay for it?
+ Secretary Leavitt. We spend 16 percent of the entire gross
+domestic product of this country on healthcare. In an earlier
+hearing today I saw a poster that indicated that is about twice
+what our economic competitors provide.
+ It is my belief the money is in the system. We have the
+capacity to provide an affordable basic health insurance policy
+to every American to give access if we were to, first of all,
+have a basic plan in most states and, second of all, use the
+tools of the federal government to level the playing field so
+that the states can solve the problems.
+ There are proposals being considered right now in at least
+18, maybe more, states I know of. They are reaching out to
+solve this problem. There are two problems they cannot solve.
+One is the tax problem we spent a lot of time talking about
+today. And the second is they need help in being able to close
+the affordability gap, and we ought to do that, period.
+ Mr. Bonner. Thank you.
+ Chairman Spratt. Ms. DeLauro.
+ Ms. DeLauro. Thank you, Mr. Chairman.
+ And welcome, Mr. Secretary.
+ Let me change topics, if I can, for a moment. About two
+weeks ago, the GAO designated that the federal oversight of
+food safety as a high-risk area and need of a broad-based
+transformation, and that if we did not deal with this kind of a
+transformation and deal with both services and expenditures in
+this area, that, in fact, we are at great risk and we needed to
+move sooner than later in this effort.
+ And we have seen E-coli outbreaks last year involving
+spinach, Taco Bell restaurants in the northeast. The
+designation by the GAO is one that is significant given that
+they have been doing this over the last 17 years, and it
+involves substantial resources and significant government, as I
+said, services in order that we try to get this food safety
+effort off of this high-risk effort.
+ FDA is one of the two main agencies responsible for much of
+the food safety responsibilities, which is in your
+jurisdiction. It is my understanding that the budget request is
+about $10.6 million for food safety. That is in addition to
+what the--from a baseline of about what, $375 million. And that
+after you factor in inflation for salaries, the spending would
+be flat and it even declines.
+ One or two other points, and I would just like to have you
+comment on this. FDA is responsible for food safety for 80
+percent of the food in this country, USDA, about 20 percent.
+The funding for FDA is about a quarter of the $1.7 billion that
+we deal with for food safety. USDA and other agencies get
+additional funding for that.
+ Now, my question to you is, how seriously are you taking
+this high-risk designation by the GAO? Is it not within your
+jurisdiction to change the funding on this area for food safety
+at FDA?
+ And, in fact, what I want to do is to ask you what are you
+prepared to do to deal with implementing this, if you will? It
+is not an order from GAO, but what it lays out is clearly an
+urgent need to remove our food supply system from its high-risk
+designation.
+ Secretary Leavitt. I have not read that report. It sounds
+like something I need to read. And I----
+ Ms. DeLauro. Mr. Secretary, it is imperative that you read
+this report. I will be flat out with you. FDA and food safety--
+I have said this at a public meeting the other day--food safety
+is a stepchild at FDA and it would appear--and I should say
+that I do not know what the priority of food safety and FDA is
+within your jurisdiction.
+ Secretary Leavitt. I commit to you that I will get a copy
+of the report and read it, but that sounds as though something
+I need to see. I have not at this point.
+ Ms. DeLauro. But tell me who deals with the FDA budget?
+What role do you have in putting together the FDA budget and in
+this instance--we will get to drug safety at another point--but
+the food safety budget for FDA?
+ Secretary Leavitt. The FDA brings a budget to me and to my
+budget office and we review it based on the principles and
+priorities. And the report sounds like something that I need to
+read.
+ Ms. DeLauro. Well, I think it is and I would urge you to do
+it as quickly as possible. And I will make one final comment.
+ It is one of the reasons why, Mr. Secretary, I want an
+independent food safety agency whose only purpose with the
+wonderful scientists, epidemiologists, the people that we have
+day in and day out when they get up in the morning, their view
+is how we make our food safe in this nation, and it is not a
+part of either an FDA or a USDA or some of the 13 other
+agencies that are out there that are dealing with our food
+safety, and we have one independent agency that puts its
+imprimatur and a gold standard on our food safety in this
+country.
+ Thank you. My time is up.
+ Chairman Spratt. Mr. Etheridge.
+ Mr. Etheridge. Thank you, Mr. Chairman.
+ Mr. Secretary, thank you. I have been in and out and I
+apologize. I have been on the floor, so please understand. And
+I hope I am not going to ask a question you already answered.
+If you have, raise your hand and I will move on.
+ But I do understand regarding physician payments, I would
+like to have a comment on that because in your testimony today,
+you said that you are committed to making the Medicare and
+Medicaid programs more attractive to physicians and other
+providers. And I admire you for that.
+ I join my colleague, Representative Hooley, in the fact
+that in rural areas, and not just in rural areas really, it is
+nearly impossible to find a doctor who will accept Medicare or
+Medicaid. Yet, most of the savings in your proposal comes from
+cutting payments to hospitals and other providers.
+ I would encourage you to go back and take a look at that
+because if you are making those cuts, it is going to be awful
+hard to get them to move in and take it when we are cutting the
+resources. And I would encourage you and your staff to review
+that one because I think that is going to be hard to do.
+ Let me move on a question, and maybe I will just ask you
+here. How do you propose to do that?
+ Secretary Leavitt. I was just going to make the point that
+our budget proposes to increase the amount of funding available
+through Medicare by 5.6 percent. We are not cutting. There are
+areas in which we are slowing the growth rate, but we are
+proposing that it continue to increase by 5.6 percent.
+ Mr. Etheridge. In talking to doctors, though, I think that
+will be a real problem. I would just say that. We will talk
+about that later.
+ The budget cuts public and preventive health funding that
+can address disease, help control healthcare costs over the
+long term. The budget reduces funding for CDC, substance abuse,
+training, and provides insufficient funding for NIH, and that
+is really what I want to ask you a question about, so you can
+keep up with inflation.
+ Some of these programs, including important cancer
+prevention research performed at NIH, which is the National
+Cancer Institute, as you know, have long time spans for their
+studies and, thus, need to have funding streams that are pretty
+predictable over a period of time.
+ I am told that organizations running experimental trials
+normally funded by NCI are considering halting planned trials
+due to the uncertainty.
+ My question is, why does the Administration budget reduce
+or eliminate these priorities at a time when we may have
+something in the pipeline that will make a huge difference?
+ Secretary Leavitt. The National Cancer Institute is a very
+good illustration to answer your question. We made the decision
+to reduce the number of noncompetitive grants that had been
+concluded. We want to keep focused on the new science.
+ Now, this budget does reflect the fact that there is a
+slight reduction in the total amount. But what is not reflected
+in the number you see is that we will have an increase in the
+number of new investigations.
+ What I have found is that over time, some of the proposals
+just were not producing the result that was hoped for and we
+designed a system that would make more grants available. And
+there will be more frequent grants, more of them on a
+competitive basis.
+ Mr. Etheridge. Well, let me move to one other area, Mr.
+Secretary, under block grants. The budget that you propose is,
+as you know, cuts block grants to a pretty healthy tune, pretty
+much devastates some of the programs.
+ Consider, for example, the Social Services Block Grant is
+one of the most effective federal efforts, I think. The
+National Governors Association calls it the glue that holds
+state and local social service programs together.
+ In 1999, you said further reduction in funding for SSBGs
+will result in cuts to vital human services for our most
+vulnerable citizens. Now, that was when you were Governor.
+ Despite that, your budget cuts SSBGs' total funding by the
+tune of 1.2 billion a year, a 29 percent cut below the 2007
+level and 37 percent lower than when you wrote the Congress as
+Governor in 1999.
+ Secretary Leavitt. Congressman, it will not surprise you to
+know that that is not the first time I have seen that letter
+recently. But I would reflect the fact that----
+ Mr. Etheridge. I am going to let you answer. The reason I
+ask that question is because you know what these programs
+provide for. They help reduce poverty. They reach to employer
+services, a host of issues that there is no safety net for if
+we are not there.
+ Secretary Leavitt. In 1999, in my own State, we were facing
+a substantial budget deficit, and that was true in most states.
+Today my own State is seeing a $1.7 billion surplus, a
+different situation.
+ At the same time, I am presenting a budget hoping to cut
+the deficit to balance the budget by 2012. There is a
+substantial amount of difference in the budget circumstances of
+the states and the budget circumstances of the federal
+government today than there was in 1999 and, hence, I feel
+quite justified in having taken both positions.
+ I will also mention, given the fact that I am quite
+knowledgeable about what those grants go for, there is an area
+of categorical funding for almost everything that those grants
+are used for.
+ Now, do Governors like to get money from the federal
+government? Yes. Did I feel like we could continue to send it
+to them at the same rate that we have in the past given their
+financial situation and ours? No.
+ Mr. Etheridge. Mr. Secretary, you would have to agree,
+though, these programs go to some of the most vulnerable people
+in America and it is very difficult for me to understand. I am
+for balancing the budget. That is why I am on the Budget
+Committee. But to do it on the backs of the most vulnerable
+citizens is very difficult for me to accept.
+ Secretary Leavitt. I am not suggesting that we not help the
+most vulnerable. I am suggesting that the states are better
+able to do it right now than we are.
+ Mr. Etheridge. Thank you, Mr. Chairman. I yield back.
+ Chairman Spratt. Mr. Scott.
+ Mr. Scott. Thank you, Mr. Chairman.
+ Thank you, Mr. Secretary.
+ Secretary Leavitt. Mr. Scott, you have been very patient.
+Thank you.
+ Mr. Scott. Well, that is what you get for being late.
+ Secretary Leavitt. I was early.
+ Mr. Scott. Thank you.
+ You indicated that the budget situation is different now
+than it was just a few years ago. You are absolutely right. For
+the ten-year budget starting in 2001, we have got eight and a
+half trillion dollars less to work with than we thought we
+would have.
+ So that does put pressure, and we are making choices. We
+are talking about repealing the estate tax, which would be
+about 80 billion a year. This year, the F&P's tax cuts will be
+about 20 billion a year. People under $100,000 will get no
+measurable benefit from that. So we are making choices.
+ Let me ask you on energy assistance under LIHEAP, do I
+understand that the President's budget cuts the amount under
+LIHEAP?
+ Secretary Leavitt. We accelerated a billion dollars from
+the 2008 budget to the 2007 budget last year, and what you are
+seeing is a reflection of that. It is clear to me that if we
+have a deficit there that we are prepared to step up and work
+with Congress. We have anticipated, given the nature of what we
+have done in the past, what is necessary. And if more is
+necessary, we will obviously step up and----
+ Mr. Scott. We will not reduce the amount or the number of
+people presently served under LIHEAP?
+ Secretary Leavitt. If it were and there was a need, then we
+would be prepared to step up and help with Congress to remedy
+it.
+ Mr. Scott. Under Head Start, will the number of students
+served go up or down under the budget and will we have
+additional funds to make improvements in the program?
+ Secretary Leavitt. We believe that we can find greater
+efficiency in Head Start, and I have talked about one way we
+could do it. We have held the budget essentially in neutral and
+we believe we can find the efficiencies there to not just serve
+the ones that are there but slightly more.
+ Mr. Scott. Well, you hope. I mean, do you have specific
+legislation pending in the Education and Labor Committee to
+effectuate these efficiencies or you just cut the money?
+ Secretary Leavitt. Mr. Scott, we recognize that Head Start
+is a very important program. We are also trying to balance the
+budget. And----
+ Mr. Scott. We are making choices.
+ Secretary Leavitt. We are. That is right. And one of the
+things we have got to do is to keep a strong economy because
+the strong economy keeps those tax dollars rolling in, which
+makes it possible for us to fund Head Start. And the
+President's tax proposals have done a good job in being able to
+stimulate the economy and generate revenues. And we are
+making----
+ Mr. Scott. So the answer is, no, there is no legislation
+pending in the Education and Workforce Committee----
+ Secretary Leavitt. You would have to talk----
+ Mr. Scott [continuing]. Education and Labor Committee?
+ Secretary Leavitt [continuing]. To Secretary Spellings, but
+none at HHS.
+ Mr. Scott. OK. Under CHIP, it is my understanding that 13
+to 15 billion is needed to maintain the present number of
+children and you have substantially less than that in the
+budget.
+ Will we be able to serve the number of children that we are
+now serving?
+ Secretary Leavitt. I articulated earlier in this hearing
+the policy of the Administration for reauthorization, and we
+believe the budget is adequate to fund that proposal.
+ Mr. Scott. Will the number of children served go up or
+down?
+ Secretary Leavitt. It would go up.
+ Mr. Scott. The number of children served will go up?
+ Secretary Leavitt. It will.
+ Mr. Scott. How much would it cost to make sure that all
+children under 200 percent of poverty are served?
+ Secretary Leavitt. You mean with SCHIP?
+ Mr. Scott. Right.
+ Secretary Leavitt. I do not know the answer to that.
+ Mr. Scott. Are pregnant women eligible in all states?
+ Secretary Leavitt. Under Medicaid?
+ Mr. Scott. Through SCHIP.
+ Secretary Leavitt. No.
+ Mr. Scott. Are any states----
+ Secretary Leavitt. I could be wrong about that. I do not
+know the answer for sure about all 50 states. States have the
+ability to craft their programs, and I do not know the answer.
+ Mr. Scott. Now, the tax plan under the President's plan, as
+I understand it, some people will pay more tax, some people
+will pay less tax. How much more tax will people--if you just
+took one side of the ledger, how much tax increase are we
+talking about?
+ Secretary Leavitt. There will be no additional taxes
+collected by the U.S. Government under this proposal.
+ Mr. Scott. Aggregate?
+ Secretary Leavitt. An aggregate.
+ Mr. Scott. Yes. But you will be paying some. Of those who
+are paying more taxes, how much taxes will they pay?
+ Secretary Leavitt. I cannot give you----
+ Mr. Scott. The 20 percent.
+ Secretary Leavitt. I cannot give you the breakout. I can
+tell you that those who do pay will be in the upper 20 percent
+of their income and that it does benefit 80 percent of those
+who have employer-sponsored insurance and 100 percent of those
+who have zero.
+ Mr. Scott. Right. But you are doing both sides of the
+ledger at the same time. Could you give us an estimate of how
+much more we would be collecting on one side before you start
+talking about how much less people will be paying on the other
+side?
+ Secretary Leavitt. There will be no additional dollars in
+any tax adjustment, any tax adjustment. There are pluses and
+there are minuses.
+ Mr. Scott. That is right.
+ Secretary Leavitt. There are three winners here, and I
+cannot give you the actual balance of it. I do not know it.
+ Mr. Scott. Thank you, Mr. Chairman.
+ Chairman Spratt. Thank you, Mr. Scott.
+ Mr. Secretary, you have been forthcoming as well as
+forbearing, and we very much appreciate your testimony.
+ Secretary Leavitt. Thank you, Mr. Chairman.
+ Chairman Spratt. We may have a few questions for the
+record, and I would ask unanimous consent that those members
+who did not have the opportunity to ask questions should be
+given the opportunity to submit questions within seven days of
+the hearing.
+ [The information follows:]
+
+Questions Submitted to Secretary Leavitt From Hon. James P. McGovern, a
+ Representative in Congress From the State of Massachusetts
+
+ Question 1: Do you or anyone on your staff regularly consult with
+infectious diseases experts to identify current and emerging threats to
+public health, such as resistant infections?
+
+ Answer: CDC has ongoing conference calls with the Infectious
+Disease Society of America regarding antimicrobial resistant
+infections. CDC also works with its Prevention Epi-Centers on several
+projects to monitor the development, spread, and response of infections
+to antimicrobial agents. CDC also monitors rates of antimicrobial
+resistance to a variety of healthcare associated pathogens through its
+National Healthcare Safety Network. These activities allow for CDC to
+converse with infectious disease experts throughout the field to
+identify and discuss current and emerging threats to public health in
+regards to infectious diseases, including resistant infections.
+
+ Question 2: A true solution to resistant bacteria requires
+scientific breakthroughs and discovery. It's my understanding many
+pharmaceutical companies have left the antibiotic market in favor of
+more profitable markets, such as treating chronic conditions. What
+incentives are currently available to encourage research and
+development in this area? If there are any, are they being used?
+
+ Answer: The National Institutes of Health (NIH) is the primary
+Federal agency for conducting and supporting medical research, helping
+to lead the way toward important medical discoveries that improve
+people's health and save lives. To this end, the NIH supports
+extramural and intramural scientists in their efforts to investigate
+ways to prevent disease, as well as the causes, treatments, and even
+cures for common and rare diseases.
+ The National Institute of Allergy and Infectious Diseases (NIAID),
+a component of the NIH, is the lead institute for research related to
+antimicrobial resistance. The NIAID has developed new funding
+mechanisms to foster research and development collaborations with
+industry and academia, including the Challenge Grant and Partnership
+initiatives, for product development. Moreover, NIAID has provided
+long-standing support for a number of drug development resources. For
+many pathogens, there are resources for target identification and
+validation, and for assay development. For selected pathogens,
+including the NIAID Priority Pathogens, there are additional resources
+for acquiring compounds, conducting screening, performing in vitro and
+in vivo assays, evaluating animal efficacy and preliminary drug
+exposure studies, and performing safety testing and pharmacokinetic/
+pharmacodynamic analyses.
+ The NIAID will continue to promote and facilitate interactions
+among industry, academia, public-private partnerships, and government
+to advance product development, and will continue to increase the
+number of targeted initiatives to enhance all phases of product
+development.
+
+ Question 3: Does the Biomedical Advanced Research and Development
+Authority, created under the Pandemic and All-Hazards Preparedness Act,
+apply to gram negative and other dangerous bacterial infections that
+threaten a significant number of Americans annually, but do not
+necessarily threaten ``national security''? If not, shouldn't it, and
+can HHS provide tailored language to this Committee to accomplish that?
+
+ Answer: The mission of the Biomedical Advanced Research and
+Development Authority (BARDA) is to develop and acquire medical
+countermeasures to establish public health emergency preparedness
+against CBRN threats and naturally occurring epidemics such as an
+influenza pandemic. The current top priority medical countermeasures
+have been identified in the recently published HHS Public Health
+Emergency Medical Countermeasures Enterprise (PHEMCE) Implementation
+Plan, and address threats for which the Department of Homeland Security
+has issued a Material Threat Determination (MTD). Broad spectrum
+antibacterials are identified as one of these top priority medical
+countermeasures to address multiple drug resistant anthrax as well as a
+number of Gram-negative biodefense threats.
+ BARDA will look for opportunities to leverage the existing
+commercial base of antimicrobial research and development for
+biodefense uses. We will use advanced development and acquisition funds
+to develop, license, and procure antimicrobials for the Strategic
+National Stockpile for biodefense indications. These efforts should
+both provide incentives for industry participation and expedite the
+acquisition of new antimicrobials for the Strategic National Stockpile.
+ In addition, NIH has a significant role in this area with a robust
+antimicrobial resistance research and development program. NIH also
+currently supports a comprehensive program to identify and develop
+broad spectrum antimicrobial agents that will address biodefense
+bacterial pathogens, as well as more common bacterial agents.
+ Industry partners can obtain further information about this issue
+by visiting the following NIH web site: http://www.niaid.nih.gov/
+factsheets/antimicro.htm
+
+ Question 4: As I mentioned, I've been reviewing current law in this
+area. Section 319E(b) directs the Secretary to provide for research
+related to the development of ``new therapeutics, including vaccines
+and antimicrobials, against resistant pathogens'' and ``medical
+diagnostics to detect pathogens resistant to antimicrobials.'' Can you
+update me regarding what has been done in this area and how much money
+has been committed to this effort?
+
+ Answer: The National Institute of Allergy and Infectious Diseases
+(NIAID) supports a robust antimicrobial resistance research portfolio
+that spans basic, translational and clinical research efforts aimed at
+combating the problem of antimicrobial resistance. Current research
+efforts include studies on the basic biology of resistant organisms;
+applied research on new diagnostic techniques, therapies, and
+preventive measures; and studies of how bacteria develop and share
+resistance genes.
+ The NIAID has specific research initiatives designed to address
+some of the most crucial, unaddressed aspects of antimicrobial
+resistance. For example, recognizing that prompt and accurate diagnosis
+is key to effective disease management, NIAID has supported several
+research initiatives focused on the development of new diagnostics.
+NIAID is also pursuing new, targeted clinical research studies in an
+effort to focus and mobilize clinical capacity to test interventions on
+methicillin resistant staphylococcus aureus (MRSA) and community
+acquired (CA)- MRSA infection and evaluate the efficacy of off-patent
+antimicrobials. NIAID-supported investigations have also led to the
+identification of a potential vaccine against Staphylococcus aureus,
+which showed promise in mouse studies. Early findings suggest
+development of a vaccine that would protect against S. aureus
+regardless of the antibiotic resistance profile is possible.
+ In fiscal year (FY) 2006, the total funding provided by the NIH for
+research on antimicrobial resistance was $221M. The projected NIH
+funding amount for FY 2007 is $221M.
+
+ Question 5: Section 319E(e) requires you to award competitive
+grants for demonstration programs to ``promote judicious use of
+antimicrobial drugs or control the spread of antimicrobial-resistant
+pathogens.'' Would you provide me with a list of demonstration programs
+funded by this program?
+
+ Answer: The CDC has funded the following demonstration programs
+through its extramural grant program in antimicrobial resistance:
+
+2001: AR in Rural Areas and Microbiological Mechanisms of Resistance
+ Samore, Matthew--Rural program in antimicrobials in the
+ intermountain region (Inter-Mountain Project on Antimicrobial
+ Resistance and Therapy, IMPART); University of Utah
+
+Lautinbach, Ebbing--Microbiologic mechanisms of dissemination of
+ antimicrobial resistance genes and relationship to
+ antimicrobial drug use and relationship to drug use:
+ Epidemiology of quinolone resistance in Escherichia coli;
+ University of Pennsylvania, PA
+
+Belongia, Edward--Resistant Enterococcus faecium in humans and poultry;
+ Marshfield Epi Research Center, Marshfield, WI
+
+Zervos, Marcus J.--Molecular epidemiology of resistant Enterococcus;
+ William Beaumont Hospital, Royal Oak, MI
+
+2002: Validation of National Committee for Clinical Laboratory
+ Standards (NCCLS) Breakpoints for Human Pathogens of Public
+ Health Importance
+
+Paterson, David L.--NCCLS interpretive criteria for Salmonella;
+ University of Pittsburgh, PA
+
+Craig, William G.--Validation of NCCLS methods and breakpoints for
+ ESBLs: University of Wisconsin-Madison, WI
+
+James H. Jorgenson--Development of interpretive breakpoint criteria for
+ Neissera Meningitidis; University of Texas Health Science
+ Center at San Antonio, TX
+
+2003: Community Associated MRSA
+
+Chambers, Henry S.__
+
+Molecular Epidemiology of MRSA ; University of California, San
+ Francisco
+
+Daum, Robert S.--Community Associated MRSA; University of Chicago,
+ Chicago, IL
+
+Miller, Loren G.--Clinical, Epidemiologic, & Molecular Descriptions of
+ Epidemic Community Associated MRSA; Harbor-UCLA Research and
+ Education Institute, Torrance, CA
+
+Lowy, Franklin--Prevalence of CA-MRSA in Northern Manhattan; Columbia
+ University, NYC, NY
+
+Zervos, Marcus J.--Characterization of Community-Associated MRSA in
+ Three Urban Areas; William Beaumont Hospital, Royal Oak, MI
+
+2004: Estimates of Economic Cost for Antimicrobial Resistant Human
+ Pathogens of Public Health Importance
+
+Fraser, Victoria J.--Outcomes and costs of antibiotic resistant blood
+ infection; Washington University, St. Louis, MO
+
+Engermann, John--Applied Research on Antimicrobial Resistance, Duke
+ University, Durham, NC
+
+Johnson, James R.--Resistant E. coli in humans and poultry, University
+ of Minnesota Twin Cities, MN
+
+Wittum, Thomas E.--Public Health importance of Agricultural Ceftiofur
+ Use; Ohio State University, Columbus, OH
+
+Lynfield, Ruth--Applied Research on Antimicrobial Resistance: Minnesota
+ State Department of Health. St. Paul, MN
+
+2006: The development of new methods to prevent transmission of
+ Antimicrobial Resistant (AR) pathogens (R01) and reducing
+ Community-Associated Methicillin-Resistant Staphylococcus
+ aureus (CA-MRSA) Infection in households (U01)
+
+Harris, Anthony--New nosocomial interventions to decrease antimicrobial
+ resistance transmission; University of Maryland, Baltimore, MD
+
+Daum, Robert S.--MRSA colonization and control in the Cook County Jail;
+ University of Chicago, Chicago, IL
+
+Climo, Michael W.--Multicenter trail of daily chlorhexidine bathing to
+ reduce nosocomial infections; McGuire (VAH) Research Institute,
+ Richmond, VA
+
+Lautenbach, Ebbing--Novel application of infection control strategies
+ to limit transmission of ESBL's; University of Pennsylvania,
+ Philadelphia, PA
+
+ Question 6: In the professional judgments of the various agencies
+under HHS (e.g., CDC, NIH, FDA), what level of federal funding is
+necessary to implement fully the elements of the interagency PHS Action
+Plan to Combat Antimicrobial Resistance under each agency's
+jurisdiction?
+
+ Answer: Antimicrobial resistance is a complex problem that
+encompasses many classes of microorganisms including bacteria, fungi,
+viruses, and parasites that adversely affects the treatment of both
+human and veterinary diseases. It is a problem that requires attention
+by many diverse interests, including public health experts, the medical
+community, veterinarians, agriculture experts, and regulatory agencies.
+In the United States and around the world, many important human
+infections have become resistant to the antimicrobial drugs for
+therapy. In some areas of the United States, more than 30% of
+infections with Streptococccus pneumoniae, the most common cause of
+bacterial pneumonia and meningitis, are no longer susceptible to
+penicillin. In the 1970s, virtually all were susceptible. Similarly,
+over 50% of Staphylococcus aureus infections acquired in U.S. intensive
+care units in hospitals are now resistant to the semi-synthetic
+penicillins, the preferred class of drugs for therapy. Some bacterial
+infections are now resistant to all available antimicrobial agents.
+Resistance to antiviral drugs, including those targeting, herpes
+viruses, influenza, and the Human Immunodeficiency Virus also continues
+to increase. Thus, action now is paramount in curtailing this growing
+problem.
+ In 2001, an interagency task force, co-chaired by CDC, the Food and
+Drug Administration (FDA), and the National Institutes of Health (NIH),
+along with other federal partners published A Public Health Action Plan
+to Combat Antimicrobial Resistance, PART I, Domestic Issues.
+www.cdc.gov/drugresistance/actionplan/index.htm. The plan addresses the
+critical areas of surveillance, prevention and control, research, and
+product development.
+ In 2007, NIH spent $220.6 million, CDC spent $17.2 million, and FDA
+spent $24.71 million on antimicrobial resistance activities.
+
+ Chairman Spratt. Thank you again very much for your
+testimony and for coming and being with us today.
+ Secretary Leavitt. Thank you.
+ [Whereupon, at 4:24 p.m., the Committee was adjourned.]
+
+
+
+