    [Budget of the United States Government]
    [III. Creating a Better Government]
    [12. Health]
    [From the U.S. Government Publishing Office, www.gpo.gov]

                                   12.  HEALTH

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                                   Table 12-1.  Federal Resources in Support of Health
                                                (In millions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                                                   Estimate
                   Function 550                   2000   -----------------------------------------------------------
                                                 Actual     2001      2002      2003      2004      2005      2006
    ----------------------------------------------------------------------------------------------------------------
    Spending:
      Discretionary Budget Authority..........    33,823    38,858    41,008    45,663    46,882    48,130    49,397
      Mandatory Outlays:
        Existing law..........................   124,521   138,710   152,363   168,913   183,636   199,672   216,553
        Proposed legislation..................  ........     2,500    10,675    13,743    14,571     4,265       121
    Credit Activity:
      Guaranteed loans........................         5        32        21        21        22        22        23
    Tax Expenditures:
      Existing law............................    91,080    99,750   108,620   117,750   127,500   136,810   147,080
    ----------------------------------------------------------------------------------------------------------------

      ----------------------------------------------------------------------
       In 2002, the Federal Government will spend about $193 billion under
    existing law and allocate nearly $109 billion in tax incentives to
    provide direct health care services, promote disease prevention, further
    consumer and occupational safety, and conduct and support research.
    These Federal activities aim to improve the health of Americans as
    evidenced by key health statistics such as life expectancy and infant
    mortality. In addition, in 2002 Federal health programs will continue
    efforts to research and understand the causes of diseases such as cancer
    and diabetes, as well as to reduce the incidence of HIV and other
    infectious diseases. The Department of Health and Human Services (HHS),
    as the Federal Government's lead agency for health, will undertake a
    thorough examination across the entire Department to become more
    efficient and ensure a streamlined, rationalized budget and program
    structure.

    Health Care Services and Financing

      Of the estimated $193 billion in Federal health care spending in 2002,
    84 percent finances or supports direct health care services to
    individuals.

      Immediate Helping Hand (IHH): The Immediate Helping Hand initiative
    provides critical assistance to our Nation's most vulnerable senior
    citizens for the cost of their prescription drugs. It provides $46.0
    billion for 2001-2005 to States to help low-income Medicare
    beneficiaries pay for their prescriptions. This proposal builds on
    coverage that is already in place in more than half the States and would
    provide benefits to 9.5 million vulnerable Medicare beneficiaries who
    currently do not have any other prescription drug coverage. The plan is
    unique because needy seniors will be able to get help with their
    prescription drug costs this year.
      IHH covers the full cost of drug coverage for individual Medicare
    beneficiaries with incomes up to $11,600 who are not eligible for
    Medicaid or a comprehensive private retiree benefit, and for married
    couples with incomes up to $15,700 (135 percent of poverty) who do not
    have access to coverage. These beneficiaries would receive comprehensive
    drug insurance for no premium with nominal charges for prescriptions.
      IHH covers part of the drug costs for individual Medicare
    beneficiaries with incomes up to $15,000 and married couples with
    incomes up to $20,300 (175 percent of poverty). These beneficiaries
    would receive subsidies for at least 50 percent of the premium for drug
    coverage.

    [[Page 98]]

      IHH also provides catastrophic drug coverage for all Medicare
    beneficiaries, giving them financial security against the risk of very
    high out-of-pocket prescription expenditures.

      Medicaid: This Federal-State health care program served about 33.4
    million low-income Americans in 2000. States that participate in
    Medicaid must cover several categories of eligible people as well as
    several mandated services. The Federal Government spent $117.9 billion,
    57 percent of the total, on the program in 2000 while States spent $89.1
    billion, or 43 percent. Medicaid covers a fourth of the Nation's
    children and is the largest single purchaser of maternity care as well
    as of nursing home services and other long-term care services; the
    program covers almost two-thirds of nursing home residents. The elderly
    and disabled made up a third of Medicaid enrollees in 2000, but
    accounted for approximately two-thirds of spending on benefits. Medicaid
    serves at least half of all adults living with AIDS (and up to 90
    percent of children with AIDS), and is the largest single payer of
    direct medical services to adults living with AIDS. Medicaid pays for
    over one-third of the Nation's long-term care services. Medicaid spends
    more on institutional care today than it does for home and community-
    based care, but the mix of payments is expected to be almost equal in 10
    years.
      Current restrictions and requirements in the Medicaid program may be
    inhibiting the States' ability to operate the program efficiently. In
    addition to taking steps to further address the Medicaid upper payment
    limit loophole, the Administration plans to consult with the States on
    the development of ideas to increase State flexibility, control Medicaid
    costs, improve Medicaid coverage, and ensure the fiscally prudent
    management of the Medicaid program.
      A major Administration priority is to improve the quality of Medicaid
    coverage. Because the Health Care Financing Administration (HCFA) and
    States jointly administer Medicaid, HCFA has worked with State Medicaid
    agencies to develop national performance goals for Medicaid. These
    efforts will continue in 2002. With respect to the goal of increasing
    immunization rates among Medicaid children, HCFA will continue to
    collaborate with States to develop individualized State immunization
    goals, with each State developing its own methodology, baseline, and
    three-year target. In 2002, the first and second groups of States will
    report their progress towards their State goals, and the final group of
    States will establish their baselines and targets. HCFA's goal
    complements the Centers for Disease Control and Prevention's (CDC's)
    broader 2002 goal of helping States ensure that at least 90 percent of
    all U.S. children by age two receive each recommended basic childhood
    vaccine.

      State Children's Health Insurance Program: The State Children's Health
    Insurance Program (S-CHIP) was established in 1997 in the Balanced
    Budget Act to provide $24 billion over five years for States to expand
    health insurance coverage to low-income, uninsured children. S-CHIP
    provides States with broad flexibility in program design while
    protecting beneficiaries through basic Federal standards.
      Each State's S-CHIP plan describes the strategic objectives,
    performance goals, and performance measures used to assess the
    effectiveness of the plan. HCFA has been working with the States to
    develop baselines and targets for the S-CHIP/Medicaid goal of decreasing
    the number of uninsured children by enrolling children in S-CHIP and
    Medicaid. In 2000, 3.3 million children were enrolled in S-CHIP, a 70-
    percent increase over 1999 levels. However, more than twice as many
    children remain uninsured.

      Other Health Care Services: In addition to Medicare and Medicaid, HHS
    administers a number of other programs, some of which have been added to
    the inventory of HHS activities over the last several years. As a
    result, HHS has evolved into a sprawling, loosely organized bureaucracy
    where several programs are serving similar populations. During 2002, HHS
    will ensure strong centralized control and coordination to eliminate
    overlap and duplicative activities. Selected health-related 2002
    performance goals are highlighted below.
       Access to health care: The budget includes a Community and
              Migrant Health Center (CMHC) initiative to increase access to

    [[Page 99]]

              health care by supporting 1,200 new and expanded community
              health center sites over five years. In 2001, 3,263 CMHC sites
              delivered high quality, culturally competent care to millions
              of uninsured and underserved Americans. In 2002, the number of
              health center sites will increase by almost 100. By increasing
              the number of health care access points, CMHCs will be able to
              help assure the provision of preventive and primary health
              care to almost one million more individuals than were served
              in 2001.
       Healthy Communities Innovation Fund (HCIF): The 2002 Budget
              includes an HHS-wide HCIF initiative that will make available
              approximately $400 million within existing grant activities to
              target innovative solutions in areas of health risks such as
              heart disease, adult and childhood Type II diabetes, and
              childhood obesity. HHS will ensure that the best and broadest
              range of innovative solutions are funded across the country.
       Indian Health Service (IHS): IHS is committed to addressing
              the major health problems afflicting Native Americans and
              Alaska Natives and has targeted diabetes because of the high
              prevalence of this disease in this population. IHS' efforts in
              disease monitoring, prevention education, and treatment focus
              on improving the average blood sugar levels of IHS' diabetic
              patients. In 2002, IHS will demonstrate a continued trend in
              improved glycemic control in the proportion of Native American
              patients with diagnosed diabetes.
       Substance Abuse and Mental Health Services Administration
              (SAMHSA): SAMHSA is committed to narrowing the treatment gap
              between those in need of treatment and those with access to
              it, which is almost three million individuals. SAMHSA also
              seeks positive, measurable outcomes for those people who do
              receive treatment. By 2007, SAMHSA expects that those who
              complete substance abuse treatment programs will achieve a 10-
              percent increase in full-time employment status, a 10-percent
              increase in educational status for adolescents, a 10-percent
              decrease in illegal activity, and a 10-percent increase in
              general medical health.
       Youth drug treatment: While drug use among youth increased
              for much of the last decade, there has been some encouraging
              news in the most recent data. The percent of youths age 12 to
              17 who reported current use of illicit drugs decreased from
              11.4 percent in 1997 to nine percent in 1999. In 2002, SAMHSA
              will aim to cut monthly marijuana use in this population by 25
              percent, from the 1998 baseline of 8.3 percent to 6.2 percent.
       Services for the mentally ill: The Surgeon General's 1999
              report on mental health states that one in five Americans is
              living with a mental health disorder. Mental health services
              funded in SAMHSA will advance the goal of increasing the
              percent of adults with serious mental illness who are
              employed, are living independently, and have had no contact
              with the criminal justice system.

      Consumer Product Safety Commission (CPSC): In 1999, there were an
    estimated 670,000 product-related head injuries to children under 15
    years old. As a part of CPSC's effort to reduce head injuries by 10
    percent by 2006, this independent agency recalled or took corrective
    actions on 20 products in 1999 and 32 in 2000 that presented a
    substantial risk of head injury. In 2002, CPSC projects pursuing another
    30 recalls or corrective actions of products that present substantial
    risk of head injury.
      Bioterrorism: HHS' Office of Emergency Preparedness will work with
    localities to establish 25 new Metropolitan Medical Response Systems,
    which develop and link local public health, public safety, and health
    services capabilities to respond to a chemical/biological/nuclear
    terrorist incident, for a total of 122 systems in various stages of
    development by the end of 2002. HHS will spend $52 million in 2002 on a
    civilian stockpile of therapeutics to meet potential threats caused by
    the agents listed in the 1999 Antibioterrorism Plan: anthrax, plague,
    tularemia, smallpox, and nerve and blister agents. In 2002, HHS plans to
    meet preparedness targets for treating victims of these agents as
    specified in the Plan. Two new agents have been added to the list, and
    HHS

    [[Page 100]]

    has begun determination of both treatment methods and victim numbers for
    these agents. Preparedness percentages will rise each year, with an
    expected readiness level of 100 percent to be reached for each agent on
    the list, including the two new agents, by 2004.
      HHS' HIV/AIDS Prevention and Care Activities: HHS spends approximately
    $2.7 billion for the Centers for Disease Control and Prevention (CDC)
    and the Health Resources and Services Administration (HRSA) to prevent
    the spread of HIV/AIDS both domestically and increasingly,
    internationally, and provide appropriate treatment for those living with
    HIV/AIDS.
       By 2005, CDC will reduce the incidence of new HIV infections
              in the United States by 50 percent, from 40,000 in 1999 to
              20,000 in 2005. As part of its efforts to achieve this goal,
              CDC will reduce the number of new infections by approximately
              six percent by 2002.
       Internationally, working with other countries, the U.S.
              Agency for International Development, and international and
              U.S. Government agencies, CDC will reduce the number of new
              infections among 15 to 24 year-olds in sub-Saharan Africa from
              an estimated two million, by 25 percent by 2005.
       There are an estimated 800,000 to 900,000 persons in the
              United States living with HIV infection, two-thirds of whom
              are aware of their status. HRSA's Ryan White CARE Act
              treatment efforts will increase the number of AIDS Drug
              Assistance Program (ADAP) clients receiving HIV/AIDS
              medications during at least one month of the year through
              State ADAPs from 65,387 in 2000 to approximately 72,000
              clients in 2002.

      Centers for Disease Control and Prevention: CDC is the leading
    prevention agency within the public health service and focuses on
    preventing and controlling disease, injury and disability. CDC's
    activities cover a broad range of programmatic areas from childhood
    immunizations to HIV/AIDS prevention to occupational safety and health
    research to infectious disease control and chronic disease prevention.
    In 2002, CDC will continue its efforts to improve State and local public
    health capacity to detect and respond to emerging infectious diseases.
    Fifty-three State health departments will have increased epidemiologic
    and laboratory capacity, which is an increase from 33 in 1999. CDC will
    also continue to work to improve its financial management, accounting
    and budgetary systems so that the total costs of CDC's activities will
    be presented more accurately and fairly.
      Health Research: The National Institutes of Health (NIH) supports and
    conducts research to gain knowledge to help prevent, detect, diagnose,
    and treat disease and disability. NIH supports nearly 60,000 awards and
    contracts to universities, medical schools, and other research and
    research training facilities while conducting over 1,200 projects in its
    own laboratories and clinical facilities. In 2002, NIH-supported
    research will aim to add to the body of knowledge about biological
    functions, develop new and improved instruments and technologies for use
    in research and medicine, and develop new or improved approaches to
    diagnosing and treating diseases and disability. NIH performance goals
    include:
       Continuing the progress of genome sequencing by completing
              two-thirds of the human genome sequence with 99.99 percent
              accuracy by the end of 2002. This goal builds on a recent
              announcement of the completion of a draft sequence and initial
              analysis of the human genome. While this draft is extremely
              useful, the next stage will involve finishing the sequence
              completely with no gaps and with a 99.99 percent accuracy.
              Currently about one-third of the sequence is in finished form.
       Additionally, progress toward development of a vaccine for HIV/AIDS
    by 2007 is encouraging. Diverse approaches to HIV vaccine design are
    being pursued, including refinements in the envelope protein strategy,
    using other HIV accessory proteins as immunogens, and improved DNA
    vaccine strategies.
       By 2002, NIH funding will have grown by $9.5 billion, or 70 percent,
    since 1998. NIH is working to meet the management challenges that can
    arise when an agency receives a substantial infusion of resources over a
    short period of time. During the 2000 financial audit, for instance, the
    Inspec

    [[Page 101]]

    tor General noted that NIH's decentralized and non-standard accounting
    processes resulted in numerous errors that were not corrected until
    several months later, significantly delaying NIH preparation of reliable
    financial statements. NIH is in the process of identifying strategies
    and policies that would be implemented in 2002 and 2003 and beyond to
    maximize budgetary and management flexibility in the future. Such
    strategies would include funding the total costs of an increasing number
    of new grants in the grant's first year and supporting some one-time
    activities such as high-priority construction and renovation projects.
       Besides NIH, eight other HHS agencies supported over $1.2 billion of
    public health, health services and policy research in 2001. In light of
    the initiative to double funding for NIH, there is an opportunity now to
    examine the HHS health research portfolio to streamline management of
    the research agenda, identify any overlap in funding for similar
    research, and set priorities. Over the coming year, HHS will examine
    these issues closely and develop recommendations for reforming the
    Department's health research activities. In particular, HHS will
    prioritize its research agenda to focus on activities where the Federal
    mission and interests are clear, and focus less on research that is more
    traditionally and appropriately supported by universities and other
    research institutions.

      Agency for Healthcare Research and Quality (AHRQ): AHRQ will continue
    efforts to gather data on the effectiveness and delivery of treatments.
    In 2002, AHRQ will conduct, support, and disseminate research on the
    organization, quality, financing, and content of health services. A
    minimum of 60 projects will be funded that will reduce medical errors
    and enhance patient safety. Evidence-based Practice Centers will produce
    a minimum of 18 evidence reports and technology assessments that can
    serve as the basis for interventions to enhance health outcomes and
    quality by improving practice.
      Office of the Secretary (OS): The OS will take the lead across HHS in
    ensuring that operations and investments are managed effectively and
    produce results. Funding for OS will grow by 14 percent in 2002, which
    will include major, new investments in information technology. The
    budget supports efforts to streamline HHS' decentralized approach to
    departmental management with the goal of enhancing coordination,
    eliminating costly duplication of efforts, and developing unified
    approaches and measurable outcomes for several of the key management
    challenges. For example, HHS will move toward a unified financial
    management system to streamline accounting operations throughout the
    Department and consolidate Department-level financial reporting. OS will
    also promote a Department-wide information technology (IT) system
    design, to find efficiencies in the Department's current internal IT
    spending base of $1.5 billion. Additionally, HHS will also review
    opportunities for managing and consolidating similar programs.
      Public Health Regulation and Food Safety Inspection: The Food and Drug
    Administration (FDA) spends over $1.2 billion a year to promote public
    health by ensuring that foods are safe and wholesome and drugs,
    biological products, and medical devices are safe and effective. It
    leads Federal efforts to review new products and ensure that regulations
    enhance public health without unnecessary burden. The FDA also supports
    important research and consumer education.
       To allow innovative new drugs, medical devices, and other products to
    be made available to the public more quickly, FDA has set the following
    performance goals for 2002:
       Review and act on 90 percent of standard original new drug
              application submissions within 10 months of receipt and 90
              percent of priority original new drug application submissions
              within six months of receipt, while handling a new drug
              application workload that grows annually; and,
       Complete first action on 90 percent of new medical device
              applications (known as pre-market applications) within 180
              days, compared to 74 percent in 1999.
       To allow for more thorough inspection of imported foods, FDA has set
    the following performance goal for 2002:
       Increase the number of import inspections of high-risk foods
              to 60,000 in 2002.

    [[Page 102]]

       The Food Safety and Inspection Service (FSIS), in the U.S. Department
    of Agriculture (USDA), inspects the Nation's meat, poultry, and egg
    products at over 6,000 establishments nation-wide. In 1996, FSIS began
    implementing a scientifically-based inspection system (Hazard Analysis
    and Critical Control Point (HACCP)) that requires meat and poultry
    plants to implement food safety controls and conduct sanitation and
    microbiological testing. In addition to in-plant inspection, FSIS
    conducts foreign and State program reviews, risk assessments, and
    consumer education to reduce the prevalence of harmful pathogens on U.S.
    meat and poultry that contribute to foodborne illness. USDA has the
    following food safety goal:
       In 2002, make continued progress towards the five-year goal
              of reducing by 50 percent the prevalence of salmonella on
              certain raw meat and poultry products by 2005.

    Workplace Safety and Health

       In 2002 the Federal Government will spend over $670 million to
    promote safe and healthful conditions for over 100 million workers in
    six million workplaces, primarily through the Department of Labor's
    Occupational Safety and Health Administration (OSHA) and Mine Safety and
    Health Administration (MSHA). Through a combination of compliance
    assistance and targeted enforcement, these agencies protect workers from
    illness, injury, and death caused by occupational exposure to hazardous
    substances and conditions. Although occupational fatalities, injuries,
    and illness are at record-low levels, the Government must maintain its
    commitment to partner with employers and workers to reduce the over six
    thousand fatalities and 5.7 million injuries and illnesses that occur
    annually.
       In 2002, OSHA will: reduce injury and illness rates by 20
              percent in at least 100,000 hazardous workplaces where OSHA
              initiates action; reduce injuries and illnesses by 15 percent
              at work sites engaged in voluntary, cooperative relationships
              with OSHA; and initiate an investigation of 95 percent of
              worker complaints within one working day or conduct an on-site
              inspection within five working days.
       In 2002, MSHA will reduce fatalities and lost-workday
              injuries to below the average number recorded for the previous
              five years.

    Federal Employees Health Benefits Program (FEHBP)

       Established in 1960 and administered by the Office of Personnel
    Management, the FEHBP is the largest employer-sponsored health insurance
    program in the Nation, providing over $20 billion in health care
    benefits a year to about nine million Federal employees, annuitants, and
    their families.
       FEHBP offers a wide range of health insurance plans that enable
    employees to choose the benefits package that best suits their
    particular health care needs and budgets. Because choice and competition
    are hallmarks of the program, the FEHBP reports one of the highest
    levels of customer satisfaction of any health care program in the
    country. About 85 percent of eligible Federal employees participate in
    the FEHBP.
       FEHBP is one part of the Government's total compensation package,
    and, like other health plans, has seen its costs outpace inflation over
    the last few years. The Administration will consider the following:
    options to ensure that the Program offers high quality and cost
    effective health plans; incentives to Federal employees and annuitants
    to choose their plans wisely; and coordination of annuitant health
    benefits with future reforms to Medicare.

      Tax Expenditures: Federal tax laws help finance health insurance and
    care. Most notably, employer contributions for health insurance premiums
    are excluded from employees' taxable income, costing $92 billion in 2002
    and $540 billion from 2002 to 2006. In addition, self-employed people
    may deduct a part (60 percent in 2001, rising to 100 percent in 2003 and
    beyond) of what they pay for health insurance for themselves and their
    families. Total health-related tax expenditures, including other
    provisions, will cost an estimated $109 billion in 2002, and $638
    billion from 2002 to 2006.

    [[Page 103]]

       To encourage private health insurance coverage, the budget includes a
    new refundable tax credit for individuals and families who are not
    covered by an employee plan nor eligible for public programs. The budget
    also includes new tax provisions to reform and permanently extend
    Medical Savings Accounts (MSAs). The budget proposes to help those with
    long-term care costs by providing a deduction for long-term care
    insurance premiums and an additional personal exemption to home
    caretakers of family members. In addition, the budget would improve
    flexible spending accounts by allowing up to $500 in unused benefits to
    be distributed as taxable income rolled over into an MSA, or rolled over
    into a 401(K) or similar plan.