    [Budget of the United States Government]
    [IV. Preparing For the 21st Century]
    [3. Strengthening Health Care]
    [From the U.S. Government Publishing Office, www.gpo.gov]

    [[Page 69]]

                          3.  STRENGTHENING HEALTH CARE

      ----------------------------------------------------------------------

      We must also keep fighting to extend affordable health care to Americans who lack it. This is a continuing
    problem in our Nation, as all of you know. Still there are too many children who lose their hearing because an
    ear infection goes untreated, or wind up in the emergency room because they couldn't see a doctor in a more
    regular way. Too many patients skimp on their own health to provide coverage for their children; too many missed
    chances to prevent illness and prepare young people to lead healthy lives--all these the product of the fact
    that tens of millions of Americans still don't have affordable health care.

                                          President Clinton
                                          January 2000

      ----------------------------------------------------------------------
       From the first days of his Administration, President Clinton has
    worked to expand access to affordable quality health care for all
    Americans. When he took office in 1993, workers feared that taking leave
    from work to care for an ill family member could cost them their jobs.
    There were no Federal protections to assure the portability of health
    benefits for workers who changed or lost their jobs or to protect
    workers from discrimination by health plans based on their health
    status. Individuals with disabilities were not able to return to the
    workforce without losing their Medicare or Medicaid health coverage.
       At that time, the ability of the Nation's health care system to
    deliver high quality care was in question. The public health delivery
    system was in badly need of repair: half of two-year-olds did not
    receive immunizations they needed against deadly diseases; cigarette use
    among youth was increasing; teenage pregnancy rates were high; the
    number of new HIV/AIDS infections and deaths was spiraling; and, Federal
    support for mental health was a low priority. Health care costs were
    rising at a rapid rate while the number of uninsured--especially
    uninsured children--was growing. Fraud, abuse, and inefficiency plagued
    the Medicare and Medicaid programs. Moreover, the strains on the
    Medicare program meant that it was projected to enter bankruptcy in
    1999.
       There are still many challenges, but in the past seven years, there
    has been significant progress in improving the Nation's health care
    system. Largely through reforms enacted in the Balanced Budget Act of
    1997, success in curbing fraud, waste, and abuse in the Medicare
    program, and a sound fiscal policy, the Federal Government's success in
    constraining the growth of Medicare and Medicaid has freed resources to
    expand coverage and extend the life of the Medicare trust fund to at
    least 2015, while pursing a responsible and balanced fiscal policy that
    will eliminate the national debt.
       There are other key measures of this progress: today childhood
    immunization rates for the most critical vaccines are at over 80
    percent; the rate of increase in youth smoking slowed over the past two
    years and experts predict that the slowing will continue; teenage
    pregnancy is at an all time low; and, Federal funding for mental health
    has increased by 90 percent.
      The enactment of the Health Insurance Portability and Accountability
    Act means that today Americans who change jobs can maintain their health
    insurance coverage while insurers are now limited in their ability to
    deny coverage due to pre-existing conditions. Last year's enactment of
    the Ticket to Work and Work Incentives Improvement Act enables people
    with disabilities to enter the workforce without losing their critically
    important health coverage. The President continues to vigorously pursue
    efforts to pass a Patients' Bill of Rights before leaving office to
    extend essential patient protections to all Americans, including
    guaranteed access to needed health

    [[Page 70]]

    care specialists and emergency room services. By Executive Order last
    year, the President extended these and other essential patient
    protections to the more than 85 million Americans enrolled in Federal
    health plans.
       The State Children's Health Insurance Program (SCHIP) was created in
    1997 to provide coverage for the uninsured children of hard-working,
    low-income parents. SCHIP has doubled its enrollment in the past year to
    two million uninsured children. The success of SCHIP illustrates that it
    is possible, working in partnership with the States, to formulate and
    implement policies to significantly expand coverage to millions of
    uninsured Americans. Support for and the expansion of SCHIP to include
    parents are among the President's key initiatives in the 2001 Budget.
      The budget builds on these accomplishments with initiatives that
    include:
      Preparing for the aging of America: The budget includes the
              President's Medicare reform proposal, which strengthens and
              modernizes the program by extending the life of the Medicare
              trust fund to at least 2025 and provides for the provision of
              a long overdue and optional prescription drug benefit. The
              budget also addresses the Nation's growing long-term care
              needs by expanding the President's long-term care initiative.
      Improving access to affordable health care: The budget
              includes a major new initiative to decrease the number of
              uninsured that includes: expanding coverage to the uninsured
              parents of children eligible for Medicaid and SCHIP;
              accelerating enrollment of uninsured children in Medicaid and
              SCHIP; offering 55 to 65 year old Americans the option to buy
              into the Medicare program; encouraging small businesses to
              offer health insurance; providing a tax credit for the
              purchase of health insurance for employees in transition;
              restoring Medicaid eligibility to legal immigrants; and,
              extending transitional Medicaid programs for the working poor.

      Assuring and improving quality of care: The budget includes
              investments to improve the quality of care for patients
              Nation-wide, including new efforts to prevent medical errors
              and improve the quality of care through improvements in
              information technology. It also includes a new initiative to
              protect patients purchasing prescription drugs over the
              Internet. These initiatives complement the Administration's
              support of a strong, enforceable Patients' Bill of Rights. The
              Norwood-Dingell legislation is representative of such a
              policy, which has received broad, bipartisan support in the
              House of Representatives.
      Supporting biomedical research: Building on recent funding
              increases for the National Institutes of Health (NIH) and
              investing almost $19 billion at NIH in 2001, this budget
              includes a $1 billion increase for biomedical research. The
              Federal investment in biomedical research continues to yield
              dramatic medical advances that improve health and quality of
              life. These additional resources will build on existing
              research in such areas as genomic medicine and bioengineering,
              that combine knowledge of basic biology with technological
              advances to produce new, life-saving therapies.
      Safeguarding and improving public health through disease
              prevention and health promotion: To protect and advance public
              health, the budget invests in: a stringent tobacco control
              policy; expanded efforts to combat HIV and AIDS both
              domestically as well as overseas; food safety programs;
              additional efforts to combat emerging infectious diseases; a
              new cancer clinical trials demonstration project for Medicare
              beneficiaries; family planning efforts Nation-wide; efforts to
              promote childhood immunizations; mental health and substance
              abuse prevention activities; improving the public health
              response to the threat of bioterrorism; a strong Food and Drug
              Administration (FDA); and, providing quality care for Native
              Americans and veterans.

    [[Page 71]]

      The budget provides significant increases to address global public
    health challenges, such as HIV/AIDS, polio, and infectious diseases.
      Ensuring the fiscal integrity of the Medicare and Medicaid
              programs: The budget proposes aggressive efforts to reduce
              Medicare fraud, waste, and abuse, and to improve the
              management of Medicare and Medicaid.

    Preparing for the Aging of America

       Since its creation in 1965, Medicare has provided medical care for
    tens of millions of older and disabled Americans, extending and saving
    lives in the process. Medicare is an essential part of American life--
    elderly Americans can be secure in knowing their medical needs will be
    treated while their adult children are not forced to make the difficult
    choice between their parent's medical costs and the needs of their own
    children. However, the demographic changes ahead, associated with the
    aging of America, mean that unless we make the right decisions today,
    the future of Medicare is at risk. Moreover, an aging society will
    strain our current long-term care system--which is already fragmented
    and not meeting the needs of many Americans.
       At the start of a new century, all Americans can take great pride in
    the legacy of the Medicare program. In its 35-year history, Medicare has
    helped to lift elderly Americans out of poverty, while offering health
    care that has extended and improved the quality of their lives. During
    this time, the average life expectancy of Americans at age 65 has
    increased by 20 percent. Poverty among the elderly has dropped by nearly
    two-thirds, and access to care has increased by one-third.
      However, this new century will present Medicare with serious
    challenges. With Americans living longer, the number of Medicare
    beneficiaries is rising much faster than the number of workers paying
    into the system. By about 2015, the Medicare trust fund will be
    insolvent just as the baby boom generation begins to retire and become
    eligible for Medicare. Since Medicare's creation, the world of medicine
    has changed, including increased reliance on prescription drugs to treat
    illness and extend lifespan. If we are to keep the promise of Medicare
    for future generations, the program designed for the 1960s must be
    modernized and strengthened to meet the challenges of the 21st Century.
      The budget includes a comprehensive plan to reform and modernize this
    vitally important program. This historic plan will: (1) modernize
    Medicare's benefits; (2) make the Medicare program more efficient and
    competitive; and, (3) extend the solvency of the Medicare Hospital
    Insurance Trust Fund.

    Modernizing Medicare's Benefit Package:

      Creating a prescription drug benefit: The centerpiece of the
              President's plan is an outpatient prescription drug plan that
              would be available to all Medicare beneficiaries. The drug
              plan would have no deductible and pay half of all
              beneficiaries' prescription drug costs up to $2,000 in 2003
              and $5,000 when fully phased-in by 2009. The benefit would be
              administered by private sector pharmaceutical benefit managers
              (PBMs) or other qualified entities, who rely on market
              competition to ensure access and quality for Medicare
              beneficiaries while obtaining lower prices on drugs. Low-
              income beneficiaries with incomes below 135 percent of poverty
              would not pay premiums or share in the cost of drug coverage
              and those with incomes between 135 and 150 percent of poverty
              would receive premium assistance. The plan also proposes to
              give financial incentives to employers who currently offer
              retiree prescription drug benefits to encourage the private
              sector to maintain its important coverage.
      Expanding access to preventive benefits: This plan creates
              incentives to encourage Medicare beneficiaries to monitor
              their health and get medical care early, if necessary, which
              can save lives and minimize the need for more extensive
              medical treatment later. It would eliminate existing
              coinsurance and the deductible for Medicare-covered preventive
              benefits, including colorectal cancer screenings, bone mass
              measurement, pelvic exams, prostate cancer screening, diabetes
              self management

    [[Page 72]]

              benefits, and mammographies. The plan also proposes a three-
              year demonstration to provide smoking cessation services to
              Medicare beneficiaries.
      Rationalizing cost sharing and Medigap: To help offset the
              costs of benefit improvements, the President's plan proposes
              to add new cost-sharing requirements for clinical laboratory
              services and to adjust the Part B deductible by indexing for
              inflation. It has been fixed at $100 since 1991. The plan also
              proposes to improve the Medigap market by expanding
              opportunities and options for individuals to enroll in Medigap
              plans.
      Reserving additional funds for protections against
              catastrophic drug costs: The budget includes a reserve fund of
              $35 billion in on-budget surplus money over 10 years. This
              funding is reserved for debt reduction or, in the event that
              the President and Congress agree, a policy that provides for
              protections against catastrophic drug costs for Medicare
              beneficiaries, or policies that otherwise strengthen the
              Medicare program.

    Making Medicare More Efficient and Competitive:

      Fee-for-Service (FFS) modernization: The budget proposes to
              give the traditional fee-for-service Medicare program new
              purchasing tools to leverage volume discounts from health care
              providers and improve quality of care. These proposals build
              on prior successful Medicare demonstrations, and management
              tools commonly found in the private sector, such as disease
              management services, which have been found to improve health
              care outcomes while reducing health care costs.
      Competitive defined benefit proposal: Under current law,
              Medicare+Choice plans are paid through a complicated
              administrative pricing structure that sets Government payments
              to private plans based on the costs of the traditional FFS
              program. For the first time, beneficiaries will be able to
              choose their managed care plan based on price and quality. The
              President's plan proposes to require plans to bid on a defined
              set of benefits and gives beneficiaries an incentive to choose
              lower cost plans in the form of lower premiums.
      Medicare management improvements: The President's plan
              continues its initiative to improve the Health Care Financing
              Administration's (HCFA's) management of the Medicare program
              through a continuing reform process that will increase HCFA's
              flexibility while also increasing accountability.

      Extending the Solvency of the Medicare Program: At a time when
    America's prosperity is strong, we need to prepare for the coming
    demographic boom, and strengthen Medicare for future generations. The
    President's plan dedicates part of the budget surplus to Medicare
    solvency--$299 billion over 10 years. This will extend the solvency of
    the Medicare Hospital Insurance Trust Fund to at least 2025, and will
    eliminate the need to radically cut access to and quality of Medicare
    benefits for America's elderly that would be inevitable in the absence
    of new resources. At the same time, by paying down the debt, this will
    ensure that the Government and the Nation are soundly positioned to meet
    the challenge of the retiring baby boomers.
      Improving Long-term Care: The budget proposes a $3,000 tax credit to
    provide support for Americans who care for a disabled or elderly
    relative. The budget also proposes group long-term care insurance for
    Federal employees, annuitants, and their families. Employees would pay
    the full cost of insurance premiums, which, at group rates, are expected
    to be 15 to 20 percent lower than the individual rates otherwise
    available. The budget invests $100 million in an innovative housing
    initiative to integrate assisted living facilities and Medicaid home and
    community-based long-term care and $140 million in a new Medicaid option
    to equalize eligibility for people with long-term care needs in
    community settings. The budget includes $125 million for a new national
    program to provide assistance to families who care for disabled elderly
    relatives by supporting local efforts to provide respite care and
    counseling, information, and other support services.

    [[Page 73]]

      Improving the Quality of Nursing Home Care: The budget invests an
    additional $15.9 million for continuing Nursing Home Initiative
    activities, a 29-percent increase over the 2000 funding level. The
    initiative will help States strengthen nursing home enforcement tools to
    ensure facilities meet Federal quality standards, and increase Federal
    oversight of nursing home quality and safety standards. The initiative
    includes funding to improve and target nursing home inspections and
    respond to resident and family complaints in a timely and effective
    manner. Funding will be provided for more frequent surveys of repeat
    offenders and improving surveyor training, handling increased legal
    advice, litigation, and hearings on nursing home enforcement cases and
    addressing the backlog of nursing home appeals.

    Improving Access to Affordable Health Care

      The President remains strongly committed to expanding access to health
    care, particularly to vulnerable groups such as children, the near-
    elderly who are not yet eligible for Medicare benefits, families who
    cannot afford health insurance, and legal immigrants. His 2001 Budget
    proposal to expand access to affordable health insurance to working
    Americans represents the most significant investment in health coverage
    in recent years. This proposal addresses the continued rise in the
    number of uninsured, one of the few indicators that has not improved in
    this strong economy. These policies to expand access to affordable
    insurance would be complemented by an investment of an additional $175
    million in community-based efforts to strengthen the health care safety
    net.

      Increasing Children's Enrollment in SCHIP:  The President proposed the
    creation of a State Children's Health Insurance Program in 1997. Passed
    by Congress the same year, the program provides health insurance to
    uninsured, low-income children, increases their access to early
    preventive medicine (including immunizations), and enhances their
    chances of becoming healthy adults. Administered by the States, either
    through Medicaid or a separate SCHIP program, SCHIP has already
    successfully reached two million uninsured, low-income children. Despite
    the success of initial enrollment efforts, however, more must be done to
    provide health insurance coverage to uninsured, low-income children.
       This initiative accelerates enrollment of uninsured children in
    Medicaid and SCHIP by expanding efforts in schools and simplifying
    eligibility. This initiative promotes enrollment in the SCHIP program
    and in Medicaid through schools by: enabling school lunch programs to
    share eligibility information with Medicaid and SCHIP for outreach
    programs; and, allowing additional sites, such as schools, child care
    referral centers, and homeless programs to determine presumptive
    eligibility. The initiative would also simplify the enrollment process
    by requiring states to make Medicaid applications no more complicated
    than their SCHIP applications. Finally, it creates an one-time $10
    million competitive grant program for State demonstrations to coordinate
    programs and increase enrollment of homeless children and families in
    Medicaid, SCHIP, and other social service programs.

      Covering the Uninsured Parents of Children in Medicaid or SCHIP:  At
    the center of the President's 2001 health insurance coverage initiative
    is a proposal to allow States to cover the parents of children eligible
    for Medicaid and SCHIP. Many of the parents of the children eligible for
    Medicaid and SCHIP are themselves uninsured. Expanding Medicaid and
    SCHIP eligibility to parents will help reduce the growing number of low-
    income adults who are without health insurance and increase the
    enrollment of their children by enabling entire families to receive
    coverage through the same programs.
      The budget proposes to expand SCHIP to become the FamilyCare program.
    FamilyCare would:
      Provide higher Federal matching payments for expanding
              coverage to parents.
              States that raise their eligibility levels for parents would
              receive higher Federal matching payments for coverage provided
              to these parents. Funding for these payments will be provided
              through increased State allotments.

    [[Page 74]]

      Enroll the parents in the same program as their children.
              Parents would be insured in the same program as their children
              to improve efficiency and continuity of care. Priority would
              be given to parents at the lowest end of the income
              eligibility scale just as lower income children are given
              priority in SCHIP. States would also be required to show that
              they are successfully enrolling children below 200 percent of
              the Federal poverty level in SCHIP before accessing additional
              funds for adults. Given the experience of SCHIP and the strong
              State support to extend SCHIP to parents, it is likely that
              many States will take up this option. If, after five years,
              however, some States have not expanded coverage of parents to
              at least 100 percent of poverty ($16,000 for a family of
              four), a failsafe mechanism would be triggered to require
              States to go to at least that level of coverage.

      Providing Medicare Buy-In for Certain 55 to 65 Year Olds: The fastest
    growing group of uninsured are those ages 55 to 65. Between 1997 and
    1998, the proportion of people in this age group who were uninsured
    increased by seven percent. As the baby boom generation enters this age
    group, this problem will only get worse. This initiative expands the
    health options available for older Americans by: enabling Americans aged
    62 to 65 to buy into Medicare; providing a similar Medicare buy-in for
    vulnerable displaced workers ages 55 and older; and providing COBRA to
    Americans ages 55 and older whose companies reneged on their commitment
    to provide retiree health benefits. To help people afford the Medicare
    buy-in, a new tax credit of 25 percent of the cost of the premium would
    be created. It would be available to both people ages 62 to 64 and
    displaced workers ages 55 to 65. Those in this group accessing COBRA
    would qualify for the 25 percent credit for COBRA (described below).
      Encouraging Small Businesses to Offer Health Insurance: Workers in
    small businesses are more likely to be uninsured. This initiative would
    encourage small businesses to offer health insurance through: a new tax
    credit for small businesses who join coalitions; tax-exempt status for
    foundation contributions to create coalitions; and, technical
    assistance. It would be different from last year's proposal because the
    credit would be increased to 20 percent of the employer contribution,
    and the credits would be available for eight years.
      Providing a Tax Credit for COBRA Continuation Coverage: Currently,
    employers must offer departing employees the option of buying into their
    health plan at a premium of 102 percent. Intended to ensure coverage
    during the transition to new jobs, this policy has proven unaffordable
    to some people and burdensome to some employers. To address these
    concerns, the new proposal would provide a tax credit of 25 percent for
    this coverage to departing employees who take this option.
      Extending Transitional Medicaid Extension: The budget proposes to
    extend and improve the transitional Medicaid program, which provides up
    to one year of coverage to those in transition, including welfare
    recipients who get jobs. This eases the transition to work and removes a
    critical disincentive--the immediate loss of Medicaid coverage. Without
    this extension, the program would end in October 2001.
      Providing a New Medicaid Option to Cover Certain Low-Income Uninsured
    Women with Breast or Cervical Cancer: The budget includes a proposed
    State option to provide Medicaid coverage to low-income, uninsured women
    who screen positive under the CDC Breast and Cervical Cancer Early
    Detection Program.
      Expanding State Options to Insure Children Through Age 20:  Nearly one
    in three people ages 18 to 24 are uninsured, mostly because they are no
    longer dependents but often do not have jobs that offer affordable
    coverage. The budget would allow States to cover people ages 19 and 20
    in Medicaid and SCHIP.
      Restoring Medicaid Eligibility for Legal Immigrants: The budget would
    restore Medicaid benefits to three vulnerable groups of legal
    immigrants: children; pregnant women; and, disabled immigrants whose
    eligibility for SSI would also be restored. In addition, parents of
    legal immigrant children who have benefits restored would also be
    covered under the

    [[Page 75]]

    Medicaid/SCHIP family coverage policy described above. As the President
    has pledged, and has achieved for other groups so affected, this would
    reverse an inequity enacted in welfare reform.
      Reinforcing the Nation's Safety Net: To continue to address the health
    care needs of people who remain uninsured, the Administration's budget
    strengthens funding for the direct delivery of health care services and
    improves access to the health care system. The budget proposes $125
    million, a 400-percent increase, to improve health care access for the
    uninsured by coordinating systems of care, increasing the number of
    services delivered, and establishing accountability in the system to
    assure adequate patient care. Additionally, the budget proposes an
    increase of $50 million for a total of over $1 billion to support and
    enhance the network of community health centers that serve millions of
    low-income and uninsured Americans.

    Assuring and Improving Quality of Care

      President Clinton has forcefully advanced efforts to promote patients'
    rights and ensure the delivery of high quality health care. Last year,
    the House of Representatives passed the Norwood-Dingell legislation
    which provides a strong enforceable Patients' Bill of Rights. The
    President encourages Congress to finish this job and pass legislation
    that includes critical patients protections such as: guaranteed access
    to needed health care specialists; access to emergency room services
    when and where the need arises; continuity of care protections so that
    patients will not have an abrupt transition in care if their providers
    are dropped; access to a fair, unbiased and timely internal and
    independent external appeals process to address health plan grievances;
    and, an enforcement mechanism that ensures recourse for patients who
    have been harmed as a result of a health plan's actions. These
    protections are now guaranteed for the 85 million Americans in Federal
    health plans. In the budget, the President has included a number of
    initiatives to improve health care quality.

      Preventing Medical Errors and Improving Quality of Care: As many as
    90,000 Americans die each year as the result of medical errors. The
    budget includes new funding at HHS, VA, and DOD to develop new avenues
    for the prevention of medical errors, including new funding to increase
    medical errors prevention, patient safety research, and information
    dissemination. In addition, in 2001, the Office of Personnel Management
    (OPM) will require Federal Employees Health Benefits Program
    participating carriers to institute initiatives to improve health care
    quality through the prevention of medical errors and enhancements in
    patient safety. The budget will also take steps to improve health care
    quality and reduce medical errors by investing in the development of
    information technology in the health care system, one of the most
    effective ways to improve the quality and efficient delivery of
    healthcare. This initiative will also ensure a coordinated Federal focus
    on health information confidentiality and security data standards.
      Protecting Patients Purchasing Prescription Drugs Over the Internet:
    This initiative will invest $10 million in new funds in the
    investigation, identification, and prosecution of websites selling
    unapproved new drugs, counterfeit drugs, prescription drugs without a
    valid prescription, expired or illegally diverted pharmaceuticals, and
    the marketing of products based on fraudulent health claims. It will
    also establish new Federal certification requirements for all Internet
    pharmacy sites, increase current civil penalties, and provide FDA with
    new administrative subpoena authority.
      Improving Health Care Quality: The budget proposes a $51 million
    increase for the Agency for Healthcare Research and Quality to enhance
    research on the uses and tools of health information technology, conduct
    clinical prevention research in the area of medical error reduction,
    expand research on worker safety issues, and otherwise enhance research
    on health care services, outcomes, effectiveness, cost, and quality.

    [[Page 76]]

    Supporting Biomedical Research

      Biomedical research is a foundation for combating disease and
    providing new technologies, from the eradication of smallpox to the
    disappearance of polio in the Western Hemisphere. Funding for biomedical
    research at NIH has increased by 73 percent since the beginning of the
    Clinton Administration. To underscore the Administration's commitment to
    this important research, the President made a commitment in 1999 to
    increase the NIH budget by nearly 50 percent in five years. Since that
    time, the NIH budget has increased by over $4.3 billion. If the Congress
    provides full funding for the President's new $1 billion investment, the
    Administration will be one year ahead of schedule in reaching the 50
    percent goal and will have increased by over 80 percent since 1993. NIH
    now supports the highest levels of research ever for cancer, diabetes,
    heart disease, and nearly all types of disease and health conditions.
      The knowledge gained from investing in biomedical research has already
    yielded a powerful information base that is steadily growing and paving
    the way for concrete advances. For example, major clinical studies have
    demonstrated that if people with diabetes can control their blood sugar
    levels very carefully, they can reduce or prevent development of
    complications of the disease. A sustained investment in NIH will enable
    scientists to seize emerging research opportunities in diabetes and
    other diseases that are a tremendous burden on health in the United
    States and abroad.
      This year, the budget proposes an additional $1 billion for NIH, for a
    total funding level of nearly $19 billion. These resources will allow
    NIH to continue to support new and expanded research that will lead to
    new medical advances such as those referenced in the Diabetes Research
    Working Group study. In addition, the budget proposes to repeal the
    provision enacted for 2000 which would delay the availability of 2000
    funds for NIH and other HHS programs.

      Using Genetic Discoveries to Improve Health Care: The Human Genome
    Project is scheduled to complete a working draft of the genome sequence
    by the spring of 2000, considerably ahead of schedule. New funds
    included in the budget will be used to explore the genetic factors
    associated with:
      Complex chronic diseases: Over the past year, researchers
              supported by NIH have discovered a number of genes associated
              with hearing loss, Alzheimers disease, and epilepsy. New funds
              will be used to continue this research and investigate the
              genetic causes of complex chronic diseases, including
              diabetes, heart disease, retinal disorders, and Parkinson's
              disease.
      Individual response to medical therapies: Genetic discoveries
              often reveal new strategies for the development of more
              effective pharmaceuticals because we are able to determine
              exactly how certain chemicals interact with human cells. New
              funds will be used to research how an individual's genetic
              makeup determines the effectiveness of medications, as well as
              what side effects are likely to occur.

      Translating Research into Practice: Over the past year, researchers
    supported by NIH have discovered a simple, affordable drug to prevent
    transmission of HIV in infants, which could potentially prevent the
    infection of up to 400,000 newborns, and a tissue engineering method to
    grow new arteries, key to the development of new therapies for heart
    disease.
      Funds will be used to develop new clinical trials evaluating therapies
    for cancer, stroke, diabetes, and mental illness and disseminate
    information on the clinical application of scientific breakthroughs to
    the public.

      Eliminating Health Disparities: Racial and ethnic minorities face
    disproportionately high infant mortality, low rates of childhood
    vaccination, high prevalence of cardiovascular disease and diabetes, and
    shorter lifespans than the population as a whole.
      In addition, NIH will establish within the Office of the Director a
    Coordinating Center that will lead NIH's efforts to develop
    multidisciplinary approaches to reducing health disparities. In
    addition, NIH will seek legislative authority for the Coordinating
    Center to award grants for health disparities research under exceptional
    circumstances. The budget includes a $20 million increase for health
    disparities research conducted by NIH Insti

    [[Page 77]]

    tutes and the Office for Research on Minority Health that will be an
    integral part of the new center.

      Fostering Interdisciplinary Research: New funds will be used to:
    develop and expand competitive grant programs to encourage researchers
    in fields such as mathematics, physics, and computer science to
    contribute to medical research and develop new ways to effectively
    manage data to maximize the scientific discoveries that will spring from
    new biological information.

    Safeguarding and Improving Public Health Through Disease Prevention and
    Health Promotion

      The budget affirms the Administration's commitment to improving public
    health, with renewed emphasis on measures to combat smoking, especially
    among young people. The budget also makes additional investments in:
    expanded efforts to combat HIV and AIDS both domestically and
    internationally; food safety programs; efforts to combat emerging
    infectious diseases; efforts to determine the environmental causes of
    disease; family planning efforts nationwide; efforts to promote
    childhood immunizations; supports pediatric physician training; a
    Medicare demonstration project on cancer clinical trials; mental health
    and substance abuse prevention activities; asthma treatment for low
    income children; improving the public health response to the threat of
    bioterrorism; a strong FDA; and, providing quality care for Native
    Americans and veterans.

      Fighting Infectious Diseases Overseas: The budget dedicates $50
    million to purchase vaccines for diseases that ravage poor nations,
    including hepatitis B, certain forms of meningitis, and yellow fever,
    helping to save millions of children. Purchasing existing vaccines is
    the first step toward accelerating the development and delivery of
    vaccines for AIDS, malaria, TB, and other diseases disproportionately
    affecting the developing world. Funds will be invested in the Global
    Alliance for Vaccines and Immunizations, a new, collaborative effort of
    UNICEF, the World Bank, the World Health Organization, and other
    governments and private organizations around the world. In addition, a
    new tax credit will encourage the development of vaccines for diseases
    that occur primarily in the developing world (e.g., HIV/AIDS, malaria,
    TB, and other infectious diseases).
      Stopping Youth Smoking: Almost 90 percent of adult smokers began
    smoking by age 18 and today, 4.1 million children aged 12 to 17--37
    percent of all high school students--smoke cigarettes. Tobacco is linked
    to over 400,000 deaths a year from cancer, respiratory illness, heart
    disease, and other problems. To end this public health crisis, the
    budget supports a focused public health effort to reduce youth smoking.
    The 1998 State tobacco settlement was an important step in the right
    direction. The Administration believes additional steps must be taken at
    the national level to reduce youth smoking.
      Cut youth smoking in half by holding the tobacco industry
              accountable: Public health experts agree that the single most
              effective way to cut youth smoking is to raise the price of
              cigarettes. To build on the momentum of the increases already
              agreed to between the tobacco companies and the States and
              those already legislated by Congress, the budget includes a
              combination of excise tax increases and youth smoking
              assessments. The cigarette excise tax would be increased 25
              cents per pack beginning October 1, 2000, and the already
              legislated increases would be moved to that date. In addition,
              beginning in 2004, tobacco companies would pay a youth smoking
              assessment, at twice the estimated lifetime profit per
              underage smoker each year that underaged smoking has not been
              reduced by 50 percent.
      Reaffirm FDA's full authority to keep cigarettes out of the
              hands of children: The Administration will continue to support
              full FDA authority to regulate tobacco products in order to
              halt advertising targeted at children, and to curb minors'
              access to tobacco products.
      Support efforts to prevent youth smoking: To support tobacco
              prevention in States and local communities, the budget
              includes $39 million for FDA tobacco enforcement activities.
              The budget also provides $106 million for the Centers for
              Disease Control and Prevention's (CDC) to

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              bacco control efforts--a tenfold increase from $10.3 million
              in 1993 to $106 million in 2001.
      Require States to cover smoking cessation drugs under
              Medicaid:  The budget includes a proposal to require States to
              cover prescription and non-prescription smoking cessation
              drugs for Medicaid beneficiaries at the standard Federal
              match. This proposal furthers the Administration's goal of
              reducing the incidence of smoking-related diseases and ensures
              that Medicaid beneficiaries have access to important smoking
              cessation drugs.
      Protect farmers and farming communities: The Administration
              fully supports the $5 billion settlement to compensate tobacco
              farmers, which was agreed to by the States and the industry in
              1998, and is committed, as Federal litigation proceeds to
              judgement or settlement, to ensuring funds are set aside for
              tobacco farmers and their communities.
      Dedicate tobacco recoveries to strengthening Medicare and
              Social Security, farmers, veterans, and other Federal health
              programs: Tobacco-related health problems have cost Medicare
              and other Federal programs billions of dollars each year. To
              recover these losses, the Department of Justice has brought
              suit against the tobacco industry, and the budget contains
              ample resources to pay the necessary legal costs. The
              Administration will propose that, in addition to any remedies
              imposed by the court to advance public health, $5 billion of
              any judgement or settlement be used to assist tobacco farmers
              and their communities, and to support the Department of
              Veterans Affairs health programs and other Federal health
              programs. One hundred percent of the remaining recoveries
              would be dedicated to the Medicare and Social Security trust
              funds, two-thirds to Medicare and one-third to Social
              Security, to enhance the security of these programs for future
              generations.

      Preventing HIV Transmission: The budget includes an additional $50
    million in community-based prevention interventions and education in the
    United States to reduce the rate of new HIV infections through expanded
    community prevention planning, with a special emphasis on racial and
    ethnic minorities, women, injection drug users and their partners, and
    young gay men. The budget also proposes a $125 million increase in Ryan
    White treatment grants to increase access to quality medical care for
    individuals living with HIV/AIDS including expanded access to life
    saving pharmaceuticals. The budget continues the initiative to reduce
    the spread of HIV/AIDS in racial and ethnic minority communities.
      The Administration secured, in 2000, $100 million to begin a Global
    HIV/AIDS initiative to help prevent the spread of HIV and AIDS in the
    developing world. This year, the budget will invest a total of $342
    million in HIV prevention around the world to build on that commitment,
    adding $100 million to last year's allocation. Funds will be targeted to
    the countries where the disease is most widespread and where our efforts
    will have the greatest impact. Activities include: increasing primary
    prevention efforts; providing care and treatment for individuals
    infected with HIV; caring for children orphaned by AIDS; strengthening
    the public health infrastructure; assisting armed forces in preventing
    the spread of HIV within military organizations; and, initiating HIV
    prevention programs in the workplace.

      Enhancing Food Safety: The budget proposes a $68 million, or 19-
    percent, increase over the 2000 level for the Administration's
    interagency food safety initiative (FSI), for a total of $422 million in
    FSI funding in 2001. This includes an additional $30 million to: allow
    the FDA to conduct annual inspections of 100 percent of high-risk food
    establishments; expand the number of imported food exams; complete the
    National Antimicrobial Resistance Monitoring System; increase laboratory
    testing capacity; improve research and risk assessment (particularly in
    the areas of antimicrobial resistance in animals and animal feeds and in
    the development of methods for predicting risk associated with foodborne
    pathogens); and, expand surveillance and education activities. A $10
    million increase would allow CDC to enhance the national network of
    public health laboratories capable of subtyping foodborne pathogen DNA
    for rapid response to disease outbreaks (PulseNet), as well as enhance
    public education efforts. USDA's

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    $28 million increase would extend risk assessment modeling and data
    collection to include the pre-harvest phase for all foods, expand
    education activities, and support bioscience research to develop
    effective methods of handling and treating agricultural products to
    minimize microbial contamination. Funding is also included for HHS and
    USDA to begin implementation of the Egg Safety Action Plan, adopted by
    the President's Council on Food Safety in December 1999.
      Preventing Infectious Diseases: This initiative will dedicate an
    additional $20 million, a 45-percent increase over the 2000 funding
    level, to create a consistent national architecture for infectious
    disease surveillance to link public health clinics, hospitals, and
    health care providers. A standardized national system for collecting and
    analyzing epidemiological data on infectious diseases will also help
    address problems, such as West Nile-like encephalitis and influenza.
      Determining the Environmental Causes of Disease, Including Breast and
    Prostate Cancer: This initiative will invest an additional $10 million,
    a 56-percent increase over the 2000 funding level, for CDC's
    environmental health laboratory to: evaluate the exposure of men, women,
    and children to toxic substances that may cause breast and cervical
    cancer, birth defects, or other diseases; develop new and improved
    methods of measuring human exposure to toxic substances; and, assist
    State and local public health officials to rapidly evaluate the impact
    of public health emergencies, such as chemical spills and groundwater
    contamination, on local residents.
      Increasing Family Planning Efforts Nationwide: The budget will invest
    an additional $35 million, a 15-percent increase over the 2000 funding
    level, for grants to family planning clinics providing reproductive
    health services and clinical care to roughly five million low income
    clients. Family planning funding has contributed to the lowest teenage
    pregnancy in 20 years, the decline in teenage sexual activity, and the
    prevention of over a million unintended pregnancies each year by
    improving the delivery of comprehensive reproductive health services. In
    addition, these clinics provide STD and cancer screening and prevention;
    HIV prevention, education and counseling; educational programs that
    encourage adolescents to postpone sexual activity; access to
    contraceptive counseling and services as well as access to effective
    contraceptives for those in need; and, partnerships with other community
    based providers to conduct outreach to adolescents at risk. The budget
    also continues the requirement that health plans in FEHBP offer the full
    range of contraceptive options.
      Promoting Childhood Immunizations: The budget proposes almost $1
    billion for the childhood immunizations initiative, including the
    Vaccines for Children program and CDC's discretionary immunization
    program. The incidence of vaccine-preventable diseases among children,
    such as diphtheria, tetanus, measles, and polio, is at an all-time low.
      Eradicating Global Polio: The budget includes funds in CDC and the
    U.S. Agency for International Development to continue efforts to
    eradicate polio globally, and provides an additional $15 million through
    CDC in 2000 to expedite and intensify global polio eradication
    activities in those countries where polio still exists.
      Increasing Access to Cancer Clinical Trials Through a Demonstration
    for Medicare Beneficiaries: The budget increases access to cutting-edge
    cancer treatments by establishing a $750 million demonstration program.
    Medicare beneficiaries who participate in certain cancer clinical trials
    will have their routine patient care costs reimbursed by the Federal
    Government.
      Expanding Substance Abuse Activities: The budget includes an $82
    million increase for the prevention and treatment of substance abuse, a
    50-percent increase from the 1993 enacted level. These new funds
    continue the Administration's commitment to expand substance abuse
    treatment for thousands of under-served Americans. To help communities
    address gaps in substance abuse services for emerging areas of need, the
    budget proposes an additional $54 million for Targeted Capacity
    Expansion grants, approximately $10 million of which will be used for
    services to ex-offenders, complementing similar proposals in the
    Departments of Justice and Labor budgets. With this increase and an
    additional $31 million in funding for the Substance Abuse Block

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    Grant, the budget will provide treatment for over 15,000 additional
    individuals. This additional $97 million is funded through a combination
    of new resources and redirecting existing resources. In addition, in
    January 2001, the FEHBP's benefit structure will, for the first time,
    provide for parity in the provision of benefits for mental health and
    substance abuse, which have long been given less favorable treatment by
    the health care industry.
      Increasing Federal Support for Improving the Mental Health of All
    Americans: According to the December 1999 Surgeon General's Report on
    Mental Health, one in five Americans is living with a mental health
    disorder. This report states that the fundamental components of
    effective service delivery are broadly agreed upon, but in short supply.
    The budget provides $731 million, an increase of $100 million for mental
    health services, a $349 million, 90-percent increase from 1993. This
    includes a $60 million increase for the Mental Health Block Grant, which
    provides integral support to States for services for people with severe
    mental illnesses. The budget also proposes $30 million for new Targeted
    Capacity Expansion grants to assist those with mental illnesses that the
    Mental Health Block Grant is not authorized to serve.
      Improving Asthma Treatment for Low-Income Children: The budget
    proposes $100 million in demonstration grants to States to test
    innovative asthma disease management techniques for children enrolled in
    Medicaid to help these children receive the most appropriate care, and
    keep their asthma in check. This program serves as an example of how
    core entitlement programs can help to accomplish critical public health
    goals--keeping children with asthma out of emergency rooms through
    appropriate environmental and pharmaceutical disease management.
      Supporting a Strong FDA: The budget proposes an increase of 13
    percent, or $163 million, over the 2000 program level to ensure the
    timely review of important drugs, medical devices, and food additives;
    expand inspection coverage of facilities under their jurisdiction; and,
    improve the quality of information on injuries and medical errors
    associated with FDA-regulated products.
      Improving the Public Health's Response to the Threat of Bioterrorism:
    The budget proposes an increase of $18.5 million, seven percent after
    reductions are taken for one-time activities, for medical and public
    health response and preparedness related to potential terrorist use of
    biological and chemical weapons. The proposed increase would support 25
    new local health care response systems for a total of 97 systems by the
    end of 2001. These activities are part of a broader multi-agency effort
    to address counter-terrorism.
      Promoting Full Participation in the Women, Infants, and Children (WIC)
    Program: Last year, WIC reached over 7.3 million low-income women,
    infants, and children, providing vouchers for nutritional food packages,
    nutrition education and counseling, and health and immunization
    referrals. Due in large part to expansion during this Administration,
    funding has grown by over 40 percent, and the program now helps nearly
    half of America's infants. Funding for 2000 is sufficient to serve 7.4
    million women, infants, and children. This budget proposes $4.1 billion
    to serve 7.5 million people by the end of 2001 in order to fulfill the
    President's goal of full participation, making sure that all who are
    eligible may take part in WIC.
      Providing Quality Health Care to Native Americans: The budget proposes
    an investment of $2.6 billion, an increase of $230 million, or 10
    percent, over the 2000 funding level, that reflects a five-pronged
    funding strategy for the Indian Health Service (IHS) (see Chapter 7,
    ``Strengthening the American Community''). This initiative includes new
    efforts to: expand preventive services designed to reduce the need for
    acute medical care; expand patient access to clinical services and
    treatment to help decrease health disparities; improve emergency medical
    services in remote locations common on American Indian and Alaska Native
    reservations; address the environmental conditions in American Indian
    and Alaska Native homes and communities by constructing safer water and
    waste disposal facilities; expand programs that provide substance abuse
    treatment and mental health services; enhance surveillance capabilities;
    provide preventive and corrective dental care and water fluoridation to
    reduce tooth loss; maintain, improve, and construct IHS' health delivery
    infrastruc

    [[Page 81]]

    ture; and, help meet the IHS' Government Performance and Results Act
    goals of providing an additional 20,000 screening breast cancer
    mammographies, increasing access to dental care to an additional 25,000
    patients, and enabling 25 new community-based public health nurses to
    provide an additional 25,000 home-based counseling, monitoring, and case
    management services.
      Caring for Veterans: Building on its commitment to veterans, the
    Administration proposes $20.9 billion for the Department of Veterans
    Affairs medical care system, an increase of $1.4 billion. This funding,
    which includes $0.6 billion in collections, will ensure that the
    Department can aggressively reduce waiting times, provide high quality
    care, and test and treat Hepatitis C.
      The budget provides for the full implementation of expanded benefits
    authorized by the recently passed Millennium Bill including: expanded
    nursing home care for the most disabled veterans and coverage of
    emergency care at non-VA facilities for certain enrolled veterans.

    Ensuring the Fiscal Integrity of the Medicare and Medicaid Programs

      The budget proposes improvements to Medicare and Medicaid to improve
    the efficacy and strength of these programs.

      Strengthening Medicare Program Integrity: The budget includes several
    policies to further reduce Medicare fraud, abuse, and overpayment. The
    budget proposes efforts to strengthen our commitment to eliminate fraud
    and abuse, ensure that Medicare payments to hospitals and other
    providers are reasonable, and promote competitive pricing. In addition,
    the budget will eliminate overpayments that facilities receive for drugs
    used to treat anemia, reform outpatient mental health benefits, and
    require insurance companies to provide information that will ensure that
    private insurers pay claims for which they are legally responsible.
      The budget also proposes a new Medicare contractor oversight
    initiative. This initiative will invest $48 million in a comprehensive
    program to improve Medicare contractor internal controls and financial
    accounting, enhance Federal performance measuring and monitoring, and
    establish a structure for overall Federal oversight. The initiative will
    fund additional contractor staff to establish and implement financial
    controls. The initiative will also develop new evaluation protocols and
    management information systems to assess contractor performance. The
    budget also funds new staff to monitor and oversee contractor operations
    and financial management and allows HCFA to contract out to test and
    evaluate contractors internal controls. This initiative was developed in
    response to a GAO report critical of a number of inappropriate practices
    by some Medicare contractors. In a closely related effort, the budget
    invests $7 million to implement a new integrated financial ledger system
    at the contractors to improve financial accountability.

      Maintaining Fiscal Responsibility in Medicaid: The budget includes
    four provisions that will strengthen fiscal integrity and accountability
    in the Medicaid program:
      Ensure appropriate allocation of Medicaid costs: The budget
              treats shared Medicaid and Temporary Assistance for Needy
              Families (TANF) administrative costs similar to the way the
              Agricultural Research Act of 1998 addressed common Food Stamp
              and TANF costs. The budget proposes a State-by-State approach
              and retains State flexibility in the use of TANF block grant
              funds.
      Strengthen HHS' authority to enforce compliance with Medicaid
              requirements: Separately, the budget also gives the Secretary
              of Health and Human Services modest new enforcement authority
              when States fail to comply in a non-substantial manner with
              Federal requirements.
      Improve Medicaid payment for prescription drugs: The Medicaid
              rebate statute currently requires brand-name drug
              manufacturers to pay an additional dollar-for-dollar rebate to
              the Medicaid program if they increase the prices of their
              brand-name drugs in excess of the Consumer Price Index (CPI-
              U). This same requirement does not apply to generic drugs.
              However, the Administration has found that some generic drug
              prices have increased rapidly in the past few years. The
              budget proposes

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              to extend to generic drugs the same CPI-U adjustment to the
              Medicaid rebate that currently applies to brand-name drugs.
      Share the Medicaid prescription drug average manufacturer
              price (AMP) with States: HCFA has found that prescription drug
              companies often inflate the prices charged to States on
              prescription drugs covered by the Medicaid prescription drug
              program. The prices are inflated relative to the AMP, a
              measure that must be reported by drug companies to HCFA but
              may not be shared with States. Since many States use other
              less accurate information made to set Medicaid reimbursement
              rates, they often overpay for prescription drugs. The budget
              proposes to allow HCFA to share the AMP with States so that
              States can use this data to more accurately set Medicaid drug
              reimbursement rates.